Speculation Over Whether NAB Plans To Sell It’s UK Units

Post by Sharat on January 5, 2009 · Under Business News, Company News, Mergers & Acquistions, banking · Comment

A report in The UK’s Sunday Times, suggested that NAB is inclined to sell of both its UK units, Clydesdale and Yorkshire Banks, after the ascension of new NAB Chief Executive Cameron Clyne who took over from predecessor John Stewart on New Year’s Day.

The report, which did not cite any sources said Mr. Clyne has signalled his “clear, unambiguous goal” will be to deliver shareholder return. The UK units may be sold because investors are unimpressed with the lower returns derived from British banking operations. Over the last five years NAB has underperformed its peers and divestment of non core units is one strategy that could be employed which would result in increasing shareholder value.

Mr. Clyne is said to be reviewing all aspects of NAB’s businesses and this is understood to include a possible sale of the British banking interests. Mr, Clyne, 40, has already stamped his authority by taking over NAB’s profit-driving Australian businesses in addition to the group role.

NAB issued a statement in response to the report which it initially had no comment on, and said “While there has been commentary over UK banks as a whole, the NAB group banks have performed extremely well relative to their peers. For the time being those banks are very much a part of the NAB group’s operations.”

A senior banker from the UK suggested that there were a few issues that ran counter-intuitive to a divestment strategy. The first being, that the UK operations were profitable, lean and well run. The second issue is that the number of bidders in the current environment is rather limited. Very few financial institutions are in a position to make acquisitions into a banking market that serves an economy which is in recession.

The third and perhaps most important issue is the valuation that NAB would receive right now if it sold both those units would be rock bottom. If it does intend to pursue a strategy of divestment, it would perhaps create far more shareholder value if it waited until there was some sort of recovery in banking valuations globally before embarking on a sale process.

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