NAB lowers expectations as Clydesdale publishes IPO prices

The lender, currently owned by National Australia Bank (NAB), announced plans for a demerger and initial public offering last month.

It intends to float on both the London and Australian stock exchanges on 2 February after final pricing on the same day and plans to sell 25 per cent of the shares to institutional investors such as pension funds through the initial public offering.

Shareholders in NAB will be allotted 75 per cent of the shares, which they could sell in the market.

The set price range gives Clydesdale, which also includes Yorkshire and is often referred to as CYBG, a market cap of £1.54-2.07bn, a discount from the bank’s book value of between £2bn and £2.5bn.

The lowest end of the price range puts Clydesdale’s value at just 0.56 times book value, putting it well below some of its challenger banks -a valuation of £2bn on Clydesdale would correspond to 76 per cent of the book value.

NAB’s chief financial officer Craig Drummond said yesterday that the company had cut the expected valuation of Clydesdale in response to the volatility seen on global stock markets amid concern about the prospects for the global economy.

“There’s no question, it’s a little lower … for the obvious reason that markets are volatile and a bit soft,” he told Australia’s Fairfax Media.

NAB may also choose not to proceed with IPO or proceed with a smaller offering, in which case it would retain some ownership in the bank.

But when speaking to Australian media, Mr Drummond reinforced the group’s determination to press ahead, a sentiment expressed at the weekend by NAB’s chairman Ken Henry when he explained: “It will be very, very important to get this behind us. The UK story has been quite distracting.”

NAB, which bought the business in 1987, said it planned to quit the 177-year-old Scottish bank in 2014 after facing a consumer backlash over methods used to sell loan insurance.

Australia’s major banks are also seeking to raise cash by issuing shares and selling non-core business units after new rules require them to have a greater amount of cash in reserve as a buffer for their loan books.