Blackfriar: Yorkshire future still in limbo despite change in tone

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THE ‘Will They/Won’t They?’ saga rumbles on at National Australia Bank.

In a third quarter trading update this week, NAB reported higher income and lower charges for bad and doubtful debts at Yorkshire and Clydesdale banks.

Cameron Clyne, the group chief executive, even used the word “pleasing” to describe the progress of his two charges, a remarkable change of tone since the days, not so long ago, when the UK was “clearly a problem asset”.

He highlighted the improved performance of the UK banks as contributing to a “solid” third quarter at Australia’s biggest business lender.

The trading update led to speculation that NAB might be quitting these shores more quickly than we think.

“No news on an eventual exit from the UK, but a resolution could occur sooner than expected due to improving conditions in the UK,” wrote David Ellis, head of Asia Pacific financial services at investment research firm Morningstar.

Blackfriar caught up with Mr Ellis yesterday morning to find out what he thinks NAB plans to do with its UK operations.

“If you asked me any time in the last few years I would have said NAB will be doing everything possible to sell its UK banks and exit the UK as soon as possible.”

While he still thinks that is on the agenda, the fairer economic news coming out of the UK and Europe might persuade NAB to maintain the status quo.

That is, assuming that Yorkshire and Clydesdale can remain profitable and deliver an improved return on equity.

“NAB could potentially retain its ownership and run the bank as it is at the moment,” added Mr Ellis.

“It all depends on the recovery in the UK banking sector and if asset values improve and there’s demand for regional banks like Yorkshire and if NAB can get a good price for it, well then I would say I tend to favour NAB will sell Yorkshire Bank when it can.”

So, NAB might sell its UK assets quicker than expected, as the economy recovers, if it can get a decent price, which could trigger special payouts for its long-suffering shareholders.

Or NAB might hold on to its UK assets to benefit from the upside as the economy recovers.

Whatever it decides, the general attitude of Australian analysts – who once would berate the UK business – is improving.

“It’s a gradual change in sentiment,” said Mr Ellis. “There’s this growing appreciation that with the UK and European economy starting to flow that banking assets are going to become more valuable.”

For anyone growing up or raising children in the 1970s, the Magic Roundabout was a charming little animation series featuring the characters such as Florence, Dougal and Zebedee shown just before bath and bedtime. For young interns who are desperate to get well-paid jobs at City investment banks, the Magic Roundabout has a wholly different, rather more sinister meaning.

Instead of clocking off in the early evening like most normal working people, these “ambitious” young recruits often work on until 3am or 4am.

A taxi will then take the intern home, wait outside while they shower and change and return them to the office for 6am and another gruelling day.

The debate over long hours and working conditions was highlighted this week following the death of Moritz Erhardt, who was a 21-year-old summer intern at a US investment bank in the City.

He was found dead in his apartment. The cause is as yet unknown.

Finance Interns, a career advice group, told the Independent: “Young people who jubilantly accept a summer internship thinking they’ve landed a chance at their dream job, find themselves declaring that, what should have been a summer full of hope, is in fact the ‘worst three months’ of their lives due to the exhausting combination of all-nighters, weekend work and the magic roundabout.

“In the toughest job market experienced in recent times, competition is even higher.

“Consequently these talented, diligent, young people are ever more willing to work hours which more senior staff would not.”

Blackfriar bemoans the fact that some of our most promising young people are being lured into the City with the promise of stellar salaries, rather choosing to pursue socially useful jobs in fields like engineering or technology.

And we shouldn’t pretend that these unhealthy practices are just restricted to the Square Mile.

There are plenty of professional services firms outside of London with extreme hours cultures.

During his research for Other People’s Money, an amusing comedy about the collapse of a blue-blood private bank in the City, the author Justin Cartwright said he learned that “bankers aren’t as bad as people think”. You can be the judge of that.

Meanwhile, he told Blackfriar that the best-selling book is likely to be made into a four-part television series.