Will resolve of NAB chief achieve Clydesdale float by end of year?

The FCA's press release of April 14, detailing the "largest-ever fine" imposed by it for failings relating to PPI, was eye-catching to say the least. The fine for Clydesdale Bank Plc, which operates the Clydesdale and Yorkshire Bank brands, was nearly £20.7 million. But it was as much the details as this big number that leapt out of the page.

The FCA said in the release: "In mid-2011 Clydesdale implemented inappropriate policies which meant that its PPI complaint handlers were not taking into account all relevant documents when deciding how to deal with complaints.

"In addition, between May 2012 and June 2013, Clydesdale provided false information to the Financial Ombudsman Service in response to requests for evidence of the records Clydesdale held on PPI policies sold to individual customers. A team within Clydesdale's PPI complaint handling operation altered certain system print outs (in a small number of cases) to make it look as if Clydesdale held no relevant documents and deleted all PPI information from a separate print out listing the products sold to the customer. These practices were not known to or authorised by Clydesdale's PPI leadership team or more senior management."

NAB's UK banking business, which the Australian bank is now aiming to float by the end of this year, has hardly covered itself in glory. Clydesdale has also had to take big exceptional charges in its accounts in recent times in relation to its selling of some complex loans to business customers.

It is important to note that other UK banks have also had to take big charges in their accounts for compensation relating to their selling of PPI and some complex business loans.

Nevertheless, given Clydesdale's difficulties on these fronts and for other reasons, NAB's ultra-upbeat tone on the prospects of floating its UK retail and business banking operations by the year-end seemed to justify at least the raising of a single eyebrow. Maybe even a Stan Laurel-style scratch of the head.

What is not surprising or puzzling at all is confirmation that NAB is going down the flotation route for Clydesdale and Yorkshire, rather than selling them to a trade buyer.

Clydesdale has certainly appeared to have been up for sale, to greater or lesser degrees, for much of the last two decades. So it seemed highly unlikely that NAB was about to unveil a deal for the sale of Clydesdale and Yorkshire to another bank or a financial buyer, unless a potential suitor was just keeping its powder dry until the last possible minute for dramatic effect.

NAB said yesterday that it remained open to a trade sale, but you would not imagine it would be diverting too much of the energies of its well-paid advisers to this particular front.

The Australian bank has clearly taken major steps already towards its plans, unveiled yesterday, to pursue a demerger and initial public offering of the holding company of Clydesdale Bank, which is National Australia Group Europe Ltd, and its subsidiaries, together referred to as 'Listco'.

Crucially, it is setting aside a large amount, up to £1.7 billion, to support Listco in relation to losses that might arise from "legacy conduct costs".

Spelling out its plans to demerge the UK operations, and sell between 20 per cent and 30 per cent of them to institutional investors by the year-end with the remainder held by existing NAB shareholders, the Australian bank said: "The UK Prudential Regulation Authority has advised that in order to demerge Listco, NAB will be required to provide capital support for Listco against potential losses related to legacy conduct costs.

"These are centred on payment protection insurance, interest rate hedging products and fixed rate tailored business loan conduct issues not covered by existing provisions, to a total cap of £1.7 billion, provided that the demerger occurs within the intended timeframe."

This clearly addresses a key issue in the planned flotation. And Clydesdale's acting chief executive, Debbie Crosbie, emphasised that oversight and governance of historical PPI complaints had been "completely overhauled".

However, you might imagine a flotation of Clydesdale and Yorkshire Banks would still not be the easiest of exercises. Clydesdale appears not to have proved that attractive a target for a trade buyer over the years and decades. And, unlike the big banks, Clydesdale and Yorkshire do not have UK-wide coverage.

We have the usual "subject to market conditions" caveat in NAB's plans, and the Australian bank's statement that "there is no certainty that a transaction will occur". And NAB signalled there were still some regulatory issues to be sorted out ahead of the planned demerger and flotation.

NAB said: "This is a substantial and complex undertaking, subject to risk and addressing a number of issues of which the most substantive is conduct mitigation...

"Discussions with regulators and other key stakeholders, whilst significant to date, remain ongoing."

That said, NAB seems utterly determined to get out of the UK market.

In 2011, when he was executive director of finance at NAB, Mark Joiner said the following to Australian journalists: "Why do we need to bias our capital to the UK when the economy [there] is expected to be on its knees for 10 years or so? There are growth opportunities in Australia."

And NAB said yesterday: "The UK economy has... underperformed other important group markets since the onset of severe financial stress during 2008."

NAB chief executive Andrew Thorburn, who only took up his post last year, declared as the plans to float the UK operations were announced: "It is a priority to exit this business."

NAB will no doubt have taken plenty of soundings from an army of advisers as it has devised its flotation plan. And it has now declared its belief that the UK business is in a position to be "listed as a standalone retail and business bank with a strong franchise across its core regional UK markets, a strong balance sheet and capital position, a robust business plan and an experienced management team".

The Australian bank meanwhile reported the UK banking operations had achieved a 33 per cent rise in underlying first-half, pre-tax cash earnings to £118m.

While NAB is not taking flotation for granted, there is no doubting Mr Thorburn's resolve. And you can bet he will be doing everything in his power to get this flotation done.

However, as the old proverb goes: "There is many a slip twixt the cup and the lip."

And NAB's long-desired exit from the UK retail and business banking market is not a done deal. Over to you Mr Thorburn.