Clydesdale to splash £300m in pre-float drive

Parent firm National Australia Bank is offering 25 per cent of CYBG -as it will be named for the float - to institutions, with the remainder retained by NAB investors.

The flotation is expected in early February and Clydesdale chief executive David Duffy said money was being spent before the sell-off on hiring more people, improving branches with digital technology, simplifying processes and enhancing the bank’s online capabilities.

He said that half of the allocated amount will be deployed by the end of this year, with the remainder coming early in the New Year.

Explaining the layout, chairman Jim Pettigrew, said: “Over the past few years we have made significant efforts to strengthen not just our financial position, but our risk profile and our governance structures. We are now in a position to pursue our own strategic objectives, priorities and opportunities as a stand-alone business.”

As an example of improving processes, Mr Duffy pointed to the recent launch of an online current account option that lets customers complete the information and open the product in 11 minutes.

CYBG, the floated company incorporating both Clydesdale and Yorkshire banks, will have its registered office in Leeds.

Mr Duffy said that was for “legal structure” reasons and confirmed the headquarters will be in Glasgow.

He said: “The actual headquarters and locus of the business is Glasgow, where it was before, and it will stay the same.”

The latest flotation document to be published in the London Stock Exchange shows Clydesdale is targeting growing its retail portfolio by between 40 per cent and 50 per cent and its SME lending by 15 per cent to 25 per cent.

It had £20.5 billion of mortgage loans at the end of September and more than £7.06bn of business lending.

Mr Duffy played down the notion these were ambitious growth targets.

He said: “Those targets represent an actual extrapolation of the last three years of performance. It is working off a small base but it is not heroic targets.”

Mr Duffy confirmed Clydesdale has no immediate plan to expand its geographic footprint in the UK, where it has 275 branches including the Yorkshire-branded outlets.

He said: “We are staying very focused on the existing regions. We are not going to push off down south.”

He added: “We are in a good position as we move into this exciting new period as an independent bank. Much has been done to re-shape and strengthen the business; supporting our plans for growth by building a better bank for customers.

“We have a clear customer-focused strategy; delivering returns by supporting our customers. Employees across the business are committed to offering our customers the products and services they need, and delivering them in the way they want.”

Mr Duffy has previously stated Clydesdale could act as a consolidator in the challenger bank market and reiterated that remained a possibility. However, the initial focus would be on proving the durability of the Clydesdale model.

He said: “I think the way we are looking at it, and we have discussed it with our board, is we are asking people for money on faith in this franchise.

“So we have got to deliver this franchise first and deliver on the promise and build trust with our shareholders before we get near any consolidation questions.”

The bank is also targeting a costto-income ratio of less than 60 per cent, which Mr Duffy said he was “very confident” of delivering.

He said institutional investors he met last week in Australia had been impressed by Clydesdale’s presentation. The book building for the initial public offering will take place in January.