There’s an overriding message from the NAB AXA deal yesterday and then the bank’s 2009 AGM in Brisbane.
And that is, the bank, now the country’s Number 3 (it used to be Number 1) has decided to retreat to Australia and New Zealand.
By spending over $5.5 billion on AXA (assuming no hiccups) and Aviva, and then the revelation at the AGM, that it is looking to quit the UK, only leaves the bank’s small rural bank in the US called Great Western.
As well, the bank confirmed in late October a deal revealed in August whereby it purchased Challenger Mortgage Management Holdings an initial cash consideration of $360 million.
The Group also acquired a selected portfolio of residential mortgage loans for $4.5 billion and 17.5% of the ordinary issued share capital of Homeloans Ltd for $10.7 million (with the potential to increase this to 41% for an additional $14.3 million).
All this is indicative of going deeper into the local financial services sector, from banking to insurance and funds management.
It quit the US mortgage servicing business (which was a disaster) exited its Irish banks (which was a timely move) a few years ago.
There are some small interests in other parts of the world, but for all intents and purposes the bank has decided the prospect of being a giant in the Australasian (mostly Australia) financial services sector is too attractive to ignore.
It’s a strategy different to the ANZ, which is heading to Asia, once more, different to the CBA, which is the Australasian giant, but with some interests in Asia (especially Indonesia) and different again to Westpac, which wants to be a big bank, without the accompanying big investments in funds management giants, as the CBA has and the NAB wants to build.
Given the way the NAB’s strategy has evolved this year, news at the AGM yesterday of moves to quit the UK, were logical.
The bank’s CEO, Cameron Clyne told the AGM NAB is in talks to sell its UK subsidiaries, Clydesdale and Yorkshire Banks.
He told shareholders NAB has been approached by "a number of players in the UK market" over industry consolidation in the UK.
"These approaches indicate that in our Clydesdale and Yorkshire bank, we have a high quality asset that is an attractive platform for participation in UK market developments," Mr Clyne said at the bank’s annual meeting in Brisbane on Thursday.
Australian analysts have been concerned for some time over the performance of NAB’s UK subsidiaries which have a high level of exposure to the crippled UK commercial property sector.
"Clydesdale Bank has remained profitable. It is one of only a few banks in the UK that has not required government assistance and has reinforced and built its good reputation throughout 2009," the CEO said..
"The UK market does remain difficult, however, as many of you would be aware, there is currently a process of consolidation occurring in the UK banking market.
"Today, I can advise shareholders that we have been approached by a number of players in the UK market to see how we could work with them to participate in that consolidation.
"These approaches indicate that in our Clydesdale and Yorkshire bank, we have a high quality asset that is an attractive platform for participation in UK market developments.
"We are going to explore and assess what value these approaches offer for NAB shareholders."
Mr Clyne said NAB’s proposed $4.6 billion acquisition of AXA Asia Pacific Holdings (AXA APH), announced earlier on Thursday, would differentiate NAB from its big three rivals.
"The merger of our Wealth business and AXA Australia and New Zealand combines two successful and highly complementary businesses, and will achieve attractive scale benefits in the Australian superannuation, retirement income and insurance markets.
"The transaction is consistent with NAB’s strategy of growing our wealth management franchise, most recently demonstrated through the acquisitions of Aviva Australia and our strategic alliance with JB Were.
"For NAB and its shareholders this proposal is underpinned by a strong strategic rationale.
"Firstly it is consistent with our continuing focus on the Australian market and in growing our market leadership positions in business banking and wealth management.
"We see these parts of the business as increasingly complementary and a point of positive differentiation for NAB.
"This proposal leverages MLC’s clear leadership position in trust and transparency and positions us for a growth market as more Australians seek financial advice and protection; and as superannuation pools continue to grow," Mr Clyne told the meeting.
That presupposes that the NAB and its management team can make what will be a very difficult task, work.
NAB is seeking to acquire AXA APH’s Australia and New Zealand units and to sell AXA APH’s Asia assets to AXA APH’s parent, AXA SA. (See accompanying story above).
The AGM was also told by chairman, Michael Chaney that the bank had its interest rate policy right.
The NAB was the only bank to limit its home loan rate rise to the 0.25% lift from the RBA.
Mr Chaney said that in "the current environment, with the expectation of ongoing increases in interest rates in Australia, funding costs are likely to remain an issue.
"As interest rates increase it is an ongoing challenge to achieve the right balance between the need to protect shareholders’ interests
