Yorkshire and Clydesdale banks’ demerger still favourite option, insists NAB

NATIONAL AUSTRALIA Bank said a demerger and initial public offering of its Yorkshire and Clydesdale brands remains its “strong intention” in spite of the volatile market for banking shares and speculation that the UK operations could be a takeover target for Spanish lender Sabadell. David Duffy, chief executive of Yorkshire and Clydesdale banks, is on an investor roadshow in Australia this week, telling NAB shareholders about the growth potential of the standalone business.

NAB plans to demerge 70-80 per cent to existing shareholders and launch an initial public offering of 20-30 per cent to institutional investors.

“Obviously, if there was something exceptional, from a shareholder value perspective we’d need to look at it.

“But to be very clear, our current intention, our strong pref- erence at the moment, is to go down a demerger and IPO,” Craig Drummond, NAB finance chief, told journalists in Australia.

Reports have suggested that Sabadell, Spain’s fifth biggest bank, is mulling a bid for Yorkshire and Clydesdale, which are Britain’s largest challenger banks. Sabadell bought TSB this year with the aim of growing the bank to challenge Britain’s ‘big four lenders.

TSB was spun out of Lloyds Banking Group last year after Lloyds was ordered to sell the business by European regulators.

“We are I think going to prove that we can be very competitive with the larger banks, given their complexity, the challenges they face, and our agility and size in the markets we are in,” said Mr Duffy, quoted by the Sydney Morning Herald.

He said that

conditions for a float are currently “untested”, adding that volatility has not been material so far.

Mr Duffy added: “We’ll have to see whether the volatility settles down or whether it continues to occur, but a lot of it was around China.”