The National Australia Bank has picked up the deposits and assets of a small regional US bank that failed on Friday night, while at the same time it is maintaining its quest for control of Axa Asia Pacific in Australia, but has abandoned its bid to buy branches being sold by the Royal Bank of Scotland in the UK.
The NAB’s Great Western Bank bought around TierOne bank and its $US2.8 billion of assets in the US state of Nebraska.
The cost was put at just under $100 million. Details will be issued to the ASX this morning.
TierOne was one of three US banks to fail on Friday and the largest.
It took the number of US banks to have failed this year to 81.
Regulators also closed two small banks in Mississippi and Illinois on Friday night, our time.
TierOne was the fourth-largest bank in Nebraska with approximately $US2.8 billion in assets as of March 31.
It lost $US300 million last year on real estate-related loans in Florida, Nevada and other states.
As of March 31, 2010, TierOne Bank also had $US2.2 billion in total deposits.
According to a statement from the lead US regulator, the Federal Deposit Insurance Corporation, "Great Western Bank will pay the FDIC a premium of 1.5 percent to assume all of the deposits of TierOne Bank.
"In addition to assuming all of the deposits of the failed bank, Great Western Bank agreed to purchase essentially all of the assets.
"The FDIC and Great Western Bank entered into a loss-share transaction on $1.9 billion of TierOne Bank’s assets.
"Great Western Bank will share in the losses on the asset pools covered under the loss-share agreement.
"The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector."
TierOne Bank was the first bank in Nebraska to close in 2010. The last FDIC-insured institution closed in the state was in February of 2009.
In September of last, Great Western Bank announced it will buy 32 TierOne Bank branches in Nebraska and Iowa for $US39 million.
The 32 branches add up to about $US800 million in selected loans and $US1.1 billion in deposits for Great Western.
Earlier on Friday in Australia, the NAB said it was pushing ahead with talks with unnamed buyers to sell Axa Asia Pacific’s North investment management platform as part of efforts by the bank to win approval from the ACCC for its planned $14 billion acquisition of Axa AP.
The comments are the first time NAB has said it is considering selling the investment platform which has been the sticking point with the Australian Competition and Consumer Commission.
”NAB is considering the possible divestment of the North Wealth.net investment platform business of Axa Asia Pacific,” NAB said in a statement to the ASX.
”NAB is in preliminary discussions with Axa Asia Pacific, the ACCC and other interested third parties in that regard.”
(The other parties are said to be Tower and IOOF.)
The NAB warned that there is ”no assurance” that such a possible divestment will occur ”or that it will address the concerns raised by the ACCC”.
While the ACCC did not name the North platform directly as the sticking point in its decision to block the merger, it said Axa AP was on the verge of delivering an innovative platform that was set to provide aggressive competition for investors with complex investment requirements.
NAB and Axa AP last week agreed to continue their six-month-old exclusivity clause which prevents the target company from soliciting another takeover bid.
The AMP is waiting in the wings.
And reports from London say the NAB has pulled out of the auction of the RBS branches.
NAB owns the Clydesdale and Yorkshire Banks in the UK and its felt the reason to abandon the deal was due to cost, some $US2 billion.
Its surprise withdrawal came just 10 days before final bids were set to be submitted.
RBS is selling 318 branches, most of which are in England, along with a share of its retail and small business customers.
The UK reports say Spain’s Santander bank, which already has a major UK presence, is now the definite front runner to buy the branches which have to be sold under an agreement with the European Commission’s competition regulators.
Despite the NAB’s assurances, there is doubt it could have bought the UK branches and bid for AXA successfully without having to make a huge cash issue (which would have been its 4th raising in three years).
The move to buy TierOne in the US will cost considerably less, but the loss-sharing arrangement with the FDIC on $US1.9 billion of TierOne’s assets means the NAB will have to allocate more capital to Great Western Bank.
The NAB could even sell its UK banks is the price is right, according to some reports.
