NATIONAL Australia Bank (NAB) may have to write down up to £500 million from the value of its UK commercial property book to clear the way for any sale of its banking operations, including Clydesdale, according to analysts at Citi.
Although a research note by the broker said that a sale of its UK interests could realise value for NAB shareholders in the form of a capital return, it argues a writedown would be needed given commercial property values have fallen 35 per cent since 2007 with speculation of a further drop by the end of 2013.
“We see this additional provisioning as an essential step in preparing Clydesdale for an eventual sale as and when qualified buyers emerge,” said the Citi note.
It added that it believes a full exit for NAB from the UK is feasible by 2014, which would release some £2.5 billion in capital.
“As NAB is not a distressed seller we therefore expect it will look to improve the bank over the next two years until more buyers emerge,” said the note.
Earlier this month, there was speculation that NAB planned to hive off its troubled commercial property business in the UK to make an eventual sale of the wider division easier. NAB’s investors have become disenchanted with the Clydesdale and Yorkshire operations because their lower earnings are seen as a drag on the better returns their parent earns in emerging markets in Asia.