Consider Clydesdale flotation, owner NAB told

Deputy Business Editor

Thursday 17 January 2013

National Australia Bank could boost its market value by between £1 billion and £3bn by floating its Clydesdale and Yorkshire Bank businesses, according to analysts.

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Greig Cameron Deputy Business Editor

Credit Suisse staff – Jarrod Martin, Omkar Joshi and James Ellis – suggest the move would boost shareholder value at NAB and see the London Stock Exchange-listed Clydesdale take a place in the FTSE 250 with a market capitalisation of around £2bn.

They also believe the move would revive the share price of NAB which has been trading at a discount to other Australian banks.The researchers used a case study based on the spin-off of fund manager Henderson Group from AMP almost 10 years ago to outline some reasons for their theory.The move would allow NAB to achieve a "substantial" exit from the UK but allow shareholders to choose to retain stock in Clydesdale, which is currently headed by David Thorburn.Credit Suisse also points out there are limited synergies between the Australian and UK businesses and a flotation would insulate the parent company from any further capital demands from its subsidiary.Further to that, the analysis suggests the move would also help repair the Clydesdale brand as there would be less speculation over its ownership and create a greater focus from management on both sides.In the research Credit Suisse said: "We estimate that a UK spin-off could create AUS$1.5-4.5bn of market capitalisation upside for NAB through the elimination of the NAB's "excess" share rating discount. "The newly created Clydesdale Bank plc would debut with an estimated market capitalisation of AUS$3bn." In recent years the UK arm has repeatedly been seen as a drag on NAB's overall profitability.In December NAB chairman Michael Chaney said the £139 million loss posted in the UK was a significant reason why group net profit dipped 22% to £2.7bn in the 12 months to September 30.The troubles in the UK, exacerbated by the patchy economic performance, have resulted in NAB putting in a major restructuring plan which it hopes will lead to £74m of annual cost savings.That involves 1400 jobs going by September 2015 in a bid to reduce the UK workforce to around 6900.As well as the staff cuts, a number of financial solutions centres are being closed and NAB is taking a £6.2bn portfolio of impaired commercial property loans off the Clydesdale balance sheet.NAB chief executive Cameron Clyne has stated those actions will make the UK business – which has 152 Clydesdale branches and 185 Yorkshire ones – a better performing bank with greater capital.In response to the Credit Suisse research a spokesman for Clydesdale Bank said: "We don't comment on market speculation."Earlier this week Clydesdale announced the closure of its Guernsey-based international arm to new business.

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Consider Clydesdale flotation, owner NAB told

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