NAB – regarded by some as overly-cautious prior to the banking crisis – regularly reviews the finances of its subsidiaries with an eye towards maintaining liquidity and a strong balance sheet.
However, this latest injection is more than Clydesdale received during the whole of the previous financial year.
That included the purchase of £200m of preference shares in Clydesdale in December 2010, followed by a further £100m in ordinary shares in July 2011.
The latest tranche of £400m has also been raised through the purchase of ordinary shares in Clydesdale, which is wholly-owned by NAB.
In a short statement issued to the Australian Securities Exchange, NAB said this latest injection would raise Clydesdale’s key Tier 1 capital ratio by 1.4 percentage points.
Based on Clydesdale’s Tier 1 ratio of 9.8 per cent at the end of September 2011, the UK bank’s main measure of capital now stands in the region of 11 per cent.
The government’s Independent Commission on Banking has recommended that the UK’s largest retail banks be required to maintain a Tier 1 ratio of at least 10 per cent, a stiffer target than the 7 per cent put forward by the International Basel Committee on Banking Supervision.
The UK government accepted the higher UK capital requirements in December, though these and related measures will be introduced in stages up through to the end of 2018.
Reporting the full-year results from its UK operations in October, NAB said the “slow and fragile pace of UK economic recovery” meant that balance sheets would remain under close scrutiny.
In a short statement released yesterday, UK chief executive David Thorburn said the fresh cash injection continued the focus on “maintaining a conservative level of liquidity and strong capital ratios”.