NAB urged to push on with sale of UK arm

ANALYSTS have urged National Australia Bank to push ahead with the sale of its troubled British unit even as the Spanish banking group Santander knocked back reports it was contemplating a bid for the Australian bank's Clydesdale and Yorkshire business.

A spokeswoman for Santander told BusinessDay they would not make a statement on the news reports, but confirmed Santander UK had denied it was in talks to buy NAB's underperforming British banks. Following a rally in NAB shares on talk of a possible sale, they ended nearly 1 per cent lower on Tuesday at $26.59.

On Monday, the chief executive of Santander UK, Ana Patricia Botin, declined to comment on the bank's rumoured interest in Clydesdale and Yorkshire, but said the bank was focused on organic growth.

NAB has declined to comment on the reports, but its chief executive, Cameron Clyne, has previously insisted he has no intention of selling at "fire sale" prices.

A Nomura banking analyst, Victor German, said regardless of whether the assets were sold, there remained a "fundamental value" in NAB.

He said as the British assets were non-core for NAB, selling them at a reasonable price would be appropriate for the bank. "I think the amount of time that management has to divert into [the British assets] and also the resources that have to go into managing this business are probably not worth the upside.

"I think if they're able to sell it at a reasonable price, it's the right thing to do, even though from a longer-term perspective, maybe there is some value in the franchise."

A report in London's Sunday Times triggered speculation that Santander wanted to bolster its British business before a planned listing in London of about £10 billion ($15 billion).

On Sunday it was reported that Santander was considering a £2 billion bid for NAB's banks, which mostly operate in northern England and Scotland.

The news had been greeted with scepticism by analysts, but they said any deal would be positive for NAB.

The Citigroup analyst Craig Williams said a sale at 0.9 times Clydesdale's book value would have returned as much as $1.2 billion to shareholders. But any deal would be a "sentiment booster" while group earnings would be barely changed.

"Shareholders would welcome the absence of management distraction and the ongoing dilution to group returns that the UK retail business represents," Mr Williams said.

Last year, NAB was plagued by falling earnings, a weak share price and millions of dollars in losses from its British business.

At its annual meeting last month, about 21 per cent of its shareholders voted against the bank's remuneration report.