Terry Murden: New kid on the block has big ambition to be a heavyweight

If EVERYTHING goes to plan, the UK government may get its wish of a new entrant to the banking sector. NBNK Investments looks to be in the driving seat of plans to mount a more serious bid for the branches and other assets being sold by Lloyds, though it looks like the somewhat older Clydesdale and Yorkshire banks will be the engine of any ”new” high street institution.

NBNK confirmed yesterday’s story in The Scotsman that it is in talks, though it did not name the other party which everyone else believes to be National Australia Bank (NAB), owner of Clydesdale and Yorkshire.

As such it has made the first significant move of any of the bidders for the Lloyds business although a tie-up of some sort with Clydesdale had been on the cards for some time.

The deal could be good for both parties. NBNK may be valued at £45 million but it is looking for a business to run. More to the point, it needs infrastructure and the ability to fund a deal before its bid for Lloyds’ assets can be deemed credible. A tie-up with NAB’s UK assets and those being sold by Lloyds would create a bank with 971 branches and £40 billion in assets, enough to get a reasonable toe-hold in the sector as the seventh largest bank on the high street,

NBNK is headed by the chairman of Lloyd’s of London Lord Levene and its board includes two other peers: Lord (John) McFall, the former treasury select committee chairman, and Lord (Michael) Forsyth, former Scottish secretary. Its banking expertise thus far has rested on Gary Hoffman, former boss of Northern Rock, another of its potential targets but one that it must sidestep until 1 November as a condition of Hoffman’s appointment.

They will have to move quickly to secure their interest in the Lloyds’ assets as second-round bids close at the end of this month, but a successful deal with NAB would give them more than a fighting chance in an auction that has failed to produce a rush of bidders. The Co-operative was weakened by the surprise resignation of Neville Richardson as chief executive and the only other contender is Hugh Osmond’s Sun Capital.

NAB initially “withdrew” from the Lloyds auction, a move that disappointed Lloyds boss Antonio-Horta Osorio who was thought to favour it over the others. But it didn’t rule itself out. NAB has long been unsure about its commitment to the UK and left the detailed due diligence to Clydesdale and Yorkshire chief executive David Thorburn who also ran the rule over the branches sold by Royal Bank of Scotland before deciding not to bid.

Should NAB leap into bed with NBNK it would provide it with a half-way solution to its UK conundrum. Taking a stake in a larger entity would provide it with greater exposure to the UK market without the need to raise capital for a bid of its own while also giving it a potential exit route via a flotation further down the road.

These moves will be closely watched by those who decided not to pursue Lloyds, namely the Edinburgh-based duo Tesco Bank and Virgin Money. The former has gone very quiet on its plans while the latter changed its mind on Lloyds after seeing the size of the funding gap.

It looked for a time as if Virgin was in the box seat after Sir Richard Branson revealed he’d raised £3 billion from UK and US investors to help make a bid possible. The bank has been bulking up its staffing in Edinburgh and Virgin Money boss Jayne-Anne Ghadia revealed at the weekend fireworks concert that she’d received more than a thousand applications for 35 vacancies.

Despite dropping out of the Lloyds process, Virgin is sticking to its message that it will change the face of banking. However, unless it is successful second time around in bidding for Northern Rock then it will have to rely on organic growth and the banking revolution will have to wait.

Global markets keeping their eyes on the US

global markets are looking to Federal Reserve chairman Ben Bernanke and President Obama tomorrow to help bring some calm for investors.

A third injection of money into the US economy may do the trick, but it may only provide short-term relief as no one is sure how a stagnant country will pay for it.