Clydesdale to be jettisoned by Aussie parent

It has finally been officially confirmed that Glasgow-based Clydesdale Bank is to be split from its Australian parent company and floated.

Today’s announcement comes as part of National Australia Bank’s full year results and follows statements made last year by NAB’s new chief executive, Andrew Thorburn, that described the shedding the UK subsidiary as a “high priority for 2015”.

The plan now outlined for the demerger issued from NAB’s Melbourne headquarters would suggest that a year spent trying to find a buyer for the scandal and penalty-hit Clydesdale, which includes Yorkshire Bank, has been unsuccessful.

The dumping of what became a millstone for NAB is expected to be finished by the end of the year and will involve 70 to 80 per cent of Clydesdale shares transferred to existing NAB shareholders, while the remaining 20 to 30 per cent siphoned off to form a new entity, known as “listco”, that will be sold to institutional investors.

Shares are to be listed on the London Stock Exchange and also traded also on an Australian market.

NAB has been told by the Financial Conduct Authority that up to £1.7bn in cover against the potential costs of misconduct and mis-selling must be provided for Clydesdale, which was recently hit with a £21m fine for failing to handle mis-selling claims properly.

A statement from 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.

The Yorkshire and Clydesdale business, which has about 7100 UK staff and more than 300 branches, has long been seen as a drag on the Australian lender’s performance, with the parent company taking on a troubled commercial lending book worth £5.6bn in order to strengthen the subsidiary.

NAB chief executive Andrew Thorburn announced the exit plan as NAB Group reported a 1.1 per cent drop in full-year profits to AU$5.3bn (£2.9bn), despite strong trading in its core business.

He said: “While our Australia and New Zealand franchises are in good shape, it is disappointing to record a full year result that includes $1.5bn after tax in UK conduct provisions and other impairments.”

Earlier this month, NAB said redress for PPI would amount to £420m in the financial year - up from £75m forecast in August - because a new complaints-handling process led to increased payments.

NAB also announced that it plans to raise AUS$5.5bn (£2.9bn) through a rights issue.

Debbie Crosbie, the acting chief executive of Clydesdale, meanwhile, said the demerger announcement “marks the beginning of an exciting new opportunity for Clydesdale and Yorkshire Banks.

NAB Group’s results revealed that Clydesdale reported a 33 per cent improvement in pre-tax cash earnings to £118m, while gross lending increased by 5 per cent to £28bn. Mortgage lending was up 15 per cent.

Average deposit volumes over the past half year averaged £24.2bn, up by £900m, with records showing an £11m one-off spend made to help attract customers to current accounts and tax-free individual savings accounts.

Internet banking customer numbers were up from 599,000 to 659,000 in the year to March.

“Our performance is improving and we’re providing real customer choice in the UK, which is driving encouraging growth across our target retail and SME markets,” Ms Crosbie said.

She added: “We believe the foundations of a strong standalone future have been laid in the progress made restructuring and refocusing our business, and this is clear in our half-year results.”

The Clydesdale Bank was founded in Glasgow in 1838. It has been owned by NAB since 1987, having previously been owned by Midland Bank.

Today’s results showed Clydesdale and Yorkshire had 294 branches in mid-March, down by 28 on the same time last year.

Also revealed were plans to close a further 19 branches, including Glasgow Springburn, Denny, Dollar, Forres, Helensburgh, Kilwinning, one in Dundee and one in Hamilton.

Branches being closed of Yorkshire Bank, which was founded in 1859, include one in Blackpool, Driffield, Stalybridge, Featherstone, Kettering, Elland, Barnsley, Altrincham and one in Leeds.