National Australia Bank (NAB) could boost its market value by up to A$4.5 billion (£3bn) by spinning off its loss-making Clydesdale division as a separately-listed entity, analysts have claimed.
The lender is under pressure to improve its shareholder returns and group chief executive Cameron Clyne is due to unveil a strategy in March aimed at reducing costs by encouraging more customers to bank online.
Clyne has previously ruled out a “fire sale” of NAB’s UK business in an effort to avoid shareholder losses, but has acknowledged that it will be some time before the division is able to generate “acceptable returns”.
He took on the role of executive chairman at Clydesdale in July following the retirement of previous chair Sir Malcolm Williamson, and has described the bank’s recent results as “disappointing” but not unexpected, given increased funding costs and weakened demand for credit.
Credit Suisse analyst Jarrod Martin said yesterday: “We estimate that a UK spin-off could create A$1.5bn to A$4.5bn of market capitalisation upside for NAB.”
He said such a deal would enable the group to achieve a “substantial exit” from the UK, while still giving its shareholders the chance to benefit from any recovery in trading.
Martin said a newly-created Clydesdale Bank plc could debut with an estimated market capitalisation of about £2bn, which would place it at about number 75 in the FTSE 250 index.
Clydesdale, which also owns Yorkshire Bank, declined to comment on the Credit Suisse report, which it described as “market speculation”.
Figures released in October showed that Clydesdale slumped to a pre-tax loss of £183 million in the year to September – its first annual loss – after it was hit by a sharp increase in bed debts.
Chief executive David Thorburn is currently overseeing a shake-up that will involve 1,400 job cuts by September 2015. The restructuring, unveiled in April, will also see the closure of business centres in the south of England to focus on its “key heartlands” of Scotland and Yorkshire.
The bank is expected to deliver a first-quarter trading update towards the end of next month.
Clyne is reported to have hand-picked a team of senior executives to help draw up his “win today, win tomorrow” strategy, which one source has claimed will identify up to A$1bn in costs and efficiencies.
NAB said: “We have previously signalled that we will provide the market with an update on our technology, looking at how we can reduce complexity for our customers.”
• The banking industry and Financial Services Authority are said to be in talks to establish a cut-off date to end the costly stream of claims relating to banks’ mis-selling of payment protection insurance (PPI).
Banks are facing a huge backlog of claims from the scandal, and analysts believe the final bill is likely to far exceed the near-£13bn already set aside.
Industry sources said the British Bankers’ Association had suggested a deadline of next summer for claims to be made, in return for the banks agreeing to finance an advertising campaign warning people of the new cut-off date. PPI is designed to cover debt repayments if the holder is ill or loses their job.