Clydesdale’s credit blow as Moody’s downgrades status

CLYDESDALE Bank was plunged into the market spotlight again yesterday as a credit ratings agency downgraded its borrowing status due to doubts over its future ownership.

The downgrade by Moody’s Investor Service came just days after a senior figure at parent group National Australia Bank suggested that, although there would be no early fire sale of Clydesdale, an eventual divestment was possible.

The comments by Mark Joiner, executive director for finance at NAB, came amid intense takeover speculation surrounding the group’s UK operations, which also include Yorkshire Bank.

Moody’s said it had downgraded the long‑term bank deposit and senior debt rating of Clydesdale to A2 from A1. It agency said the move “reflects a reduction in Moody’s view of the likelihood of parental support for Clydesdale from its parent National Australia Bank”.

It noted that the lower rating remained on review for possible further downgrade, and Clydesdale’s prime short-term bank deposit and debt rating had also been placed on review.

Moody’s said: “In Moody’s view the discussion about a potential sale of Clydesdale raises questions about the long‑term strategic commitment of NAB to the UK market.”

One City banking analyst said yesterday that NAB had only itself to blame for raising the possibility of a future sale or flotation of Clydesdale and Yorkshire, even though ironically Joiner poured cold water on the idea of any imminent divestment.

Joiner said now would be a “rotten time to sell”. He added that NAB UK was profitable and there would be no fire sale as the parent group wanted to keep options open to exit, or float.

The analyst said: “This was bound in respect to set the hare running as to how committed NAB is to the UK. They’ve brought this downgrade on themselves somewhat gratuitously.”

NAB is understood to have rejected two recent approaches for Clydesdale and Yorkshire banks, which have some 2-3 per cent of the UK retail banking market.

One is believed to have come from NBNK Investments, the sector consolidation vehicle that is also bidding for 600‑plus Lloyds branches up for auction.

David Thorburn, chief executive of NAB UK, yesterday said he regretted Moody’s decision.

“We are disappointed at the outcome of Moody’s review,” he said, “particularly when they acknowledge NAB as a supportive parent to our UK business.

“Strong in our own right, we remain part of one of the strongest banking groups in the world. We are fully committed to retaining our strong capital, funding and liquidity positions.”

make a 9 per cent contribution, over three years, when household budgets are already extremely stretched.

“Workers are being told to pay more to get the same benefit, but there is no appreciation as to where the money will be found to be able to do so.”

The union said the people being hit by the latest “substantial” changes “are not wealthy bankers, but frontline banking staff who serve customers in call centres and bank branches”.

Clydesdale Bank defended the changes, saying the contributions were optional and that staff could decide not to make them in return for a diminished pension.

Barry Gardner, group press spokesman, said: “This non-contributory pension scheme is simply not sustainable. In common with many other organisations, it has been affected by reduced investment returns as a result of the global downturn, the expectation of lower returns in future as well as improvements in life expectancy rates generally”.

Gardner said more than half of NAB UK’s 8,500 workforce were unaffected by the latest changes as they are not in the defined benefit scheme.

Many of them are in an alternative pension scheme and already make contributions.

When Clydesdale ditched its final-salary scheme five years ago, David Thorburn – the then-chief operating officer and now chief executive – said the aim was “to put UK pension arrangements on a secure and sustainable footing”.