David Duffy, who became chief executive of Clydesdale and its sister operation Yorkshire Bank in June, said: “Some investors will obviously look at it and say there may be consolidation, so there could be a premium in the shares for them.
“That’s from the outside in, where somebody seeks to acquire us. Equally, there’s potentially significant equity upside if we were a consolidator.
“As the largest full-scale SME [small- and medium-sized enterprise] challenger, that’s a very viable option too. We would be open‑minded to it.”
Duffy said speculation about consolidation among the UK challenger banks was partly stimulated by the flotation and demerger from Lloyds of its TSB subsidiary last year before being rapidly acquired by Spanish banking group Sabadell. “TSB did a float, but was suddenly gobbled up,” he said.
However, he added that Clydesdale would not prioritise merger deals, being more focused on building its offer for retail customers and small businesses.
“You have to earn the right to participate in acquisitions. But if you get that right, then, with the position and scale we have, we certainly have consolidation as an option,” he added.
It came as NAB said that it planned to list its British business in February, about two months later than its previous guidance, and Clydesdale and Yorkshire Banks posted a £2 million fall in cash earnings to £156m in the year to end‑September.
This was partly caused by a 6.6 per cent rise in expenses to do with restructuring and pre-separation costs, and an 11.3 per cent fall in business lending to £7.1 billion. Clydesdale said the latter was caused by “the managed run-off” of loans given at poor margins in previous years and “subdued demand for credit and competitive pressures”.
The UK operations have been plagued by bad debts and misconduct charges, and also took another £465m charge in the latest year – of which £390m was for mis-selling loan insurance.
However, bad debts halved to £38m, customer lending was up 4 per cent to £28.7bn and customer deposits rose 10.3 per cent to £26.3bn.
Retail lending was strong, up £2bn over the year, or more than 10 per cent, to £21.6bn. Duffy said he felt the performance would give investors he met on the roadshow to drum up interest in the flotation “a lot of comfort regarding the confidence in the franchise I expressed. We have got momentum.”
He said Clydesdale and Yorkshire banks balance sheet was “robust”, with improved loan quality, and that it was also easier to question “the commercial viability of everything we do” locally rather than “being (partly) managed from thousands of miles away”.