NAB shares rose yesterday as shareholders met in Perth to mark the final annual meeting of retiring chair, Michael Chaney, who has been at the helm of the bank for the past decade.
The bank’s meeting came at the end of a very active year as the NAB (along with its peers raised billions in new capital, sold off assets to help build higher capital holdings) rode out the sluggish economy and the surge in house prices and the investor boom in Sydney and Melbourne and the investor.
The bank sold 80% of its insurance arm for more than $2 billion to Japanese insurance group, Nippon, but the biggest challenge has been getting its UK banking assets fit to be sloughed off. That is underway and subject to a final shareholders meeting on January 27, 2016, the sale of the UK bank businesses, Clydesdale and Yorkshire, should happen in February.
The NAB confirmed that it will go ahead with Clydesdale and Yorkshire Bank’s listing on the London Stock Exchange and the Australian Securities Exchange as part of its demerger from National Australia Bank Ltd.
NAB shares rose 2.3% yesterday to $29.03 on the ASX yesterday.
NAB 1Y – NAB nears end of UK misadventure
NAB said in May that it would sell between 20% and 30% of Clydesdale, which has been a capital-sucking financial eyesore for years.
But the bank seems to have stabilised its rotten property bad debt situation (along with the stronger UK economy) and it’s left $1.1 billion in extra capital to handle any more charges from miss-selling financial products, which has bene a persistent source of fines and compensation claims for the bank and its UK peers.
Spinning off the bank will also allow the NAB to shore up its balance sheet to cover regulator demand for new capital to meet tougher rules on asset risks and reserves from Australian bank regulators.
The NAB indicated last week that February was the target for the spin off and overnight Clydesdale CEO David Duffy told Reuters that 25% of the bank will be floated on the stock exchanges, while 75% will be “de-merged” to existing NAB shareholders (who will get one share for every four NAB shares held). Both moves are planned for early February.
Mr Duffy said Clydesdale is not expected to lay off employees or close branches to boost its profit as it pursues a return on tangible equity target of at least 10% by 2020.
That strategy is in contrast to larger banks such as RBS, Lloyds, Barclays, HSBC and Standard Chartered which have been shedding assets and cutting jobs as they close risky or unprofitable operations.
After it lists, Clydesdale is expected to join the ranks of what UK analysts call “challenger” banks in the UK which have emerged in the past three years to take on those larger and more established banks such as Lloyds Banking Group, RBS, HSBC and Standrad Chartered.
