National Aussie Bank flags float of troubled UK biz
Published on: Friday, October 31, 2014
SYDNEY: National Australia Bank said Thursday it was considering a float of its troubled British business after it was hit with a fall of nearly 10 per cent in cash profits due to hefty UK writedowns.Annual net profit was down 1.1 per cent at Aus$5.3 billion (US$4.7 billion), but cash earnings, which strip out volatile items and are more closely watched by analysts, dropped 9.8 per cent to Aus$5.18 billion in the year to September.NAB chief executive Andrew Thorburn described the result as "disappointing."
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"While our Australia and New Zealand franchises are in good shape, it is disappointing to record a full-year result that includes a Aus$1.5 billion after tax in UK conduct provisions and other impairments," he said. NAB has been restructuring its British businesses, particularly the Clydesdale and Yorkshire banks, and at the start of the month flagged more than US$1 billion of writedowns, including a Aus$297 million charge for the introduction of new software."Our clear focus is on our Australian and New Zealand franchises... and as a result we need greater urgency dealing to our remaining low-returning assets," Thorburn said."In relation to exiting UK banking, this means we are now examining a broader range of options including those provided by public markets."NAB bought Scotland-based Clydesdale Bank in 1987 and Yorkshire Bank in 1990.
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The Australian lender did not provide further details on when and how it would exit the British arms, but said it had spoken to regulators about such a move."We've obviously spoken to not just the NAB board but the UK board, UK management, regulators, ratings agencies – so we've gone through a very thorough process to be able to make this statement today," Thorburn said at an analysts' briefing.
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"Clearly that's an intent to exit but we've got to go through a very methodical and disciplined process and once we do that and we can make an announcement, we will."Bell Potter banking analyst TS Lim said NAB was "heading in the right direction"."Andrew Thorburn's coming clean on a lot of things and he's outlined exit options for the legacy businesses, so that's good to see," Lim told AFP."It's still short on detail but basically, he's committed to increasing the (return on equity) of the bank."The bank added that it was looking to boost returns from its wealth business, with Thorburn describing the division's cash earnings as "below acceptable levels".NAB Wealth recorded an increase in cash earnings of 13.4 per cent for the year to September to Aus$365 million."Wealth products are an essential part of our customer offering, however returns are below acceptable levels and as a result we are evaluating a number of options to improve the returns of this business," Thorburn said.NAB said cash profit for the year would have risen 12.4 per cent but for the writedowns.Stay up-to-date by following Daily Express’s Telegram channel.
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