NAB in talks over joint bid for hundreds of Lloyds branches

Published on Wednesday 13 April 2011 21:23

CLYDESDALE Bank's Australian owner is understood to be seriously considering a joint bid for hundreds of Lloyds Banking Group branches in a move that could pave the way for an eventual exit from the UK market.

National Australia Bank is talking with a number of players, including the newly formed NBNK Investments and BBVA of Spain, according to sources.

NAB is believed to have been encouraged by the Independent Commission on Banking's call on Monday for a "substantially enhanced" sale of Lloyds branches, going beyond the 600 ordered by Europe in return for a taxpayer bail-out.

Analysts say between 800 and 1,000 branches may now have to be sold, amid reports yesterday that Chancellor George Osborne will tell Lloyds it is in the bank's "enlightened self-interest" to sell additional outlets.

One source said: "There are a number of different options. There are lots of potential buyers and sellers in the UK banking market. People are thinking of interesting and creative ways to do transactions."

The City believes that by acquiring extra branches to bulk up its UK operations, NAB would be making the business more attractive for an eventual sale or flotation.

Cameron Clyne, NAB's chief executive, appeared yesterday to keep all options open.

He said: "There is a lot of debate in the UK market at present about the future shape of the UK banking industry with a common theme being that (it] would benefit from more traditional banks and more competition. This places our operations in a great position to capitalise on this sentiment."

NAB's priority was to grow its UK arm organically "but in this climate it is also only natural that we would look at other options available to us", he added.

Banking analysts said the careful phrasing meant NAB could either become a consolidator or eventual "consolidatee" in a rapidly changing UK banking landscape.

Clydesdale Bank has been consistently profitable in recent years, but banking returns lag some of NAB's other operations.

One analyst said: "NAB clearly does not want to put big money in the UK. It looks at it as a market fraught with risk and low growth."

However, industry insiders said an acquisition of up to 1,000 Lloyds branches could be done with a partner's financial help, and take NAB's UK market share of 3 per cent to about 13 per cent – similar to that enjoyed by Spanish banking group Santander. One said: "By bulking up in this way, it would make NAB's UK operation more easy to be publicly listed down the line and provide an exit strategy for the Australians. However, that might take three or four years."

NBNK, which was set up as a banking acquisition vehicle by City grandees Lord Levene and Sir David Walker last year, declined to comment.

NAB collaborated with BBVA on an unsuccessful bid for 300-plus Royal Bank of Scotland branches last year, an auction won by Santander.

Credit rating agency Moody's yesterday said if Lloyds was forced to sell more than 600 branches it "could be negative for Lloyds's standalone financial strength".