Clydesdale Bank’s parent National Australia Bank (NAB) announced yesterday that the lender could be valued at up to nearly £2.1 billion in next month’s planned stock market flotation.
The upper price is £400 million lower than a previous expected valuation of up to £2.5bn. But analysts said that NAB did not want to over-price the issue of shares in Clydesdale and its sister operation Yorkshire Bank amid renewed stock market volatility since the start of 2016.
NAB has priced shares in the Glasgow-based group at between 175p and 235p ahead of the initial public offering (IPO). That implies a multiple of book value of 0.56 to 0.76 times, and would value the floated business at between £1.54bn and £2.07bn.
Richard Hunter, head of equities at broker Hargreaves Lansdown, said: “NAB has been looking for an apposite time to offload Clydesdale, and has finally decided to bite the bullet, possibly due to its requirement to build its own cash buffers.
“Strategically, it appears that Clydesdale has not been a comfortable fit with NAB for some time and it seems to have decided to act sooner rather than later, despite the general caution and volatility surrounding global markets.”
A global marketing roadshow aimed at institutional investors kicked off in London yesterday. Melbourne-based NAB gave itself the option to pull the flotation, even at this late stage.
The blue-chip FTSE-100 index has lost nearly 7 per cent so far in January, partly due to renewed global jitters about the slowdown of the Chinese economy, and the plummeting price of oil to just $27 a barrel yesterday.
The Australian bank said: “NAB may elect not to proceed with the IPO or to only proceed with a partial IPO, in which case NAB will retain a shareholding in CYBG [Clydesdale Yorkshire Banking Group].
“The demerger is not conditional on the IPO proceeding, but the IPO is conditional on the demerger proceeding.” The shares are due to start trading on the London Stock Exchange on 2 February.
Institutional investors are being offered a 25 per cent stake in Clydesdale through the IPO, with NAB shareholders holding the remaining 75 per cent. They will receive one Clydesdale share for every four they hold in the Melbourne-based group.
Last Friday, Clydesdale, led by chief executive David Duffy, gave reassurance over its asset quality and trading ahead of the demerger.
The bank said that lending balances to small firms were stable in the final three months of 2015, as it said it continued to run off its non-core business lending.
Its net interest margin – the difference between what the bank charges on loans and pays on savings, and a key performance indicator for the City – was in line with previous guidance at an annualised 2.2 per cent.