Martin Flanagan: NAB moves to appease investors Down under

Most strategic reviews have one of three outcomes: chopping some businesses and keeping others; floating the whole business arm concerned on the stock market, or simply selling it.

But the trouble with NAB’s commitment to its UK arm is that it has become a bit of an Aussie TV soap opera itself. It is difficult to dispel the Groundhog Day feeling that this might not be the strategic review to draw a line under a saga that has gone on – with the odd advertising break for Clydesdale and Yorkshire’s generally resilient trading results – since the credit crunch and Lehman implosion of 2007-8.

So might the latest review be a space‑filler to keep the Australian stock market sweet while NAB’s chronic ambivalence towards its UK offspring plays itself out over a yet longer timeframe?

Quite possibly, I think. Cameron Clyne, NAB’s chief executive, said yesterday it was clear that the British economy’s weakness will last much longer than previously thought, given the twin pressures of the public austerity programme and the eurozone debt crisis.

His concern, then, looks to be with the UK economy rather than company-specific to Clydesdale and Yorkshire. Quite simply, the returns on capital are better in Australia and in Asia than they are in austerity Britain. But there’s the rub. The bleak UK backdrop – some authoritative figures are talking about a lost decade – is exactly why the Australian parent would not get a decent price for the UK assets.

So it is entirely possible that Clyne sees a strategic review as a pragmatic halfway house to strip NAB UK back to its most reliable and utilitarian business of retail banking, mortgages etc, perhaps allied to a better online offering.

In this scenario, that would suggest areas like business banking, commercial property loans and the like would be most at risk of scaling back or exit. Alongside, of course, the hallowed keystone of any strategic review of back office cutbacks, management de-layering and, er, doing something with IT. In banking, something is always being done with IT.

All this would not preclude a sale of NAB UK farther out. A staging post strategic review could simply make NAB UK a cleaner operation for an acquirer to swallow at a better price when British economic recovery eventually beckons.

In the meantime, restructuring of a UK business that has been the subject of a series of credit downgrades regarding doubts on NAB’s commitment to it could be a useful stopgap sop to a sceptical investor base Down Under.

BP finds silver linings amid dark clouds

OIL major BP remains a corporate curate’s egg. Its increased profits and dividend rise continue to show a company getting over the Gulf of Mexico environmental catastrophe and, up to a point, its star‑crossed voyage into the Russian Arctic.

But multi‑billion dollar legal claims from the Macondo oil spill still hang over BP, giving the impression of a business trying to move into the future but still entangled in the shadowlands of the past. Chief executive Bob Dudley, who succeeded the public relations‑lite regime of predecessor Tony Hayward at the height of the Gulf disaster, admitted this two‑way pull yesterday.

“We have many people who do say, we are interested in investing in BP, but not until all this is behind you,” Dudley told a news conference.

This is likely to last some time, even with BP’s solid underlying trading. The group is facing 600 civil lawsuits, which has to concentrate investors’ minds.

The only thing Dudley and the rest of the team can do is produce more of the same to show BP’s “recovery” is on firm foundations and sustainable.

Each milestone that is passed, such as yesterday marking the first dividend rise since a payout was reinstated a year ago, will help sentiment towards what was for a long time an oil industry icon. The group has to press on, while just realistically acknowledging the retro rockets of US litigation.