NAB in Australia’s largest ever capital raise

SYDNEY: National Australia Bank yesterday announced the country’s biggest ever rights issue to raise A$ 5.5 billion ( US$ 4.4 billion) while detailing plans to demerge its British banking business.

The country’s fourth biggest lender outlined its proposals as it posted a net profit of A$ 3.44 billion in the six months to March 31, a 20.4 per cent jump from the previous year.

Its cash profit, the industry’s preferred measure which strips out volatile items, rose 5.4 per cent to A$ 3.32 billion, with its six-monthly dividend remaining at 99 cents.

The numbers came as the bank went into a trading halt ahead of the capital raise, primarily to bolster its balance sheet and provide a buffer to meet tougher regulatory requirements, which will likely see higher reserve capital requirements.

It will offer 194 million new shares, around eight per cent of its issued capital, at A$ 28.50 each, a deep 19 per cent discount to Wednesday’s closing price.

The raising is the biggest ever in Australian corporate history, exceeding the Aus 4.4 billion mining giant Rio Tinto drummed up in 2009.

NAB chief executive Andrew Thorburn said it would help the bank exit its troubled British operations, which include Clydesdale Bank, by the end of the year.

Before it can do that, British regulators have told NAB it needs to shore up Clydesdale’s balance sheet to protect it against potential losses linked to past problems, including misconduct issues.

“In relation to exiting our UK banking business, we have been examining a broad range of options including those provided by public markets,” said Thorburn.

“It is a priority to exit this business, and we are today announcing our intention to pursue a demerger and IPO of the UK banking business.”

He added that a strong balance sheet had always been a priority at NAB “which is why we are today announcing that we will be raising 5.5 billion of capital through a rights issue”.

“The capital raising facilitates our proposed exit from the UK banking business and positions us ahead of anticipated regulatory changes.

“While there is still much more to be done, we are clear about our priorities and are focused on what needs to be achieved,” he added.

The bank will look to demerge 70 to 80 per cent of Clydesdale to NAB shareholders while the remaining 20 to 30 per cent will be sold through an initial public offering to institutional investors. — AFP