Terry Murden: Flotation may buoy NAB ahead of RBS asset race

Published on Monday 12 April 2010 20:47

RUMOURS about a flotation of National Australia Bank's UK assets – Clydesdale and Yorkshire – first surfaced in The Scotsman in January and were doing the rounds again at the weekend as the heat is turned up on who may buy the high street branches being sold by Royal Bank of Scotland.

Interest has been fuelled by speculation about how bidders would finance a deal, expected to be in the region of 2 billion to 3bn. NAB has been among the long-time favourites to pick up the RBS stable of 312 branches in England and Wales and six NatWest outlets in Scotland.

Also, Cameron Clyne, NAB's chief executive, hinted to investors earlier this year that he may be tempted into at least a partial flotation of the Clydesdale and Yorkshire assets. According to the latest City talk, NAB may seek to raise the money in the event of it failing to secure the RBS assets, though the more likely reason would be to support an acquisition.

NAB may look to source funding from back home in Melbourne, but the bank has been trading at a discount to its rivals Westpac and Commonwealth Bank on the Australian market, where there has continued to be some scepticism about its continued involvement in the UK.

During the short time he's been in charge, Clyne's smoke signals have not always been clear. But the decision to lodge a bid for the RBS branches appears to have dispelled the notion that NAB has any intention to sell its UK assets.

City sources say Goldman Sachs and Morgan Stanley have been asked to look at options for a flotation of Clydesdale and Yorkshire, and that the move is not only to raise the funds for an acquisition but also to ensure that NAB can meet tougher capital adequacy requirements with the Bank of England in the event of it more than doubling in size.

A flotation may also pave the way for a third party to join the bank in funding a deal. There was talk earlier this year that Resolution, the acquisition vehicle created by Clive Cowdery, may be interested in a joint move on RBS assets, though Resolution currently looks to be more interested in life assurance than banking. But with Blackstone tying up with Wellcome Trust, the prospect of NAB securing private equity backing cannot be ruled out.

NAB is certainly well positioned to acquire the RBS assets. The Treasury insisted it wanted "new entrants" to the high street banking market, though the realistic – and, frankly, most suitable – winner will most likely be an established bank with no baggage from the financial crisis, a foothold in UK banking, a robust balance sheet, a strong back-office and transparency in its operations.

Of those who have bid, only NAB and Spanish bank Santander tick all those boxes, though in Santander's case there is a risk of overlap and therefore job cuts.

The UK government may say it wants new entrants, but it won't want to take undue risks that land itself with more embarrassing problems.

Big firms have stepped up – politicians must follow

AFTER years of talking the talk about renewables, we're now beginning to see some evidence of the work coming through.

Scottish & Southern Energy is taking a stake in a Fife fabrication yard as part of a 17 million investment in the company that will secure jobs and promises to create hundreds more.

This will give Burntisland Fabrications a head start in an already fiercely competitive sector that now requires skilled labour to achieve its goals.

Only last week a report from Taylor Hopkinson Associates – the only recruitment company in Scotland specialising in renewable energy – cast doubt on the scale of jobs being predicted and, perhaps more damningly, on the country's ability to train enough skilled people to fill the jobs that are now becoming available. The usual warning – that Scotland could miss out if it does not act quickly enough – should alert those currently pounding the streets demanding our votes.

To give the country's colleges the benefit of the doubt, great efforts are being made to ensure courses are made available. Abertay University, for one, is producing young people with the skills they will require for a new industry that is vital to Scotland's future.

The backing of SSE for BiFab's plans is a vote of confidence saying that big industry is prepared to invest. It is for government to match that commitment by ensuring it is not another opportunity wasted.