October 28, 2015 / 10:53 AM / 3 years ago

Clydesdale could be target or challenger bank consolidator after IPO: CEO

LONDON (Reuters) - The head of National Australia Bank’s (NAB)(NAB.AX) British arm, Clydesdale, said it could be a takeover target or lead consolidation among UK “challenger” banks after it is separated and floated in four months.

A National Australia Bank (NAB) sign is displayed outside an office building in central Sydney, Australia, July 24, 2015. REUTERS/David Gray

NAB said on Wednesday that it plans to demerge and list its British business in February, two months later than its previous guidelines.

“Some investors will obviously look at it and say there may be consolidation, so there could be a premium in the shares for them,” said David Duffy, chief executive of Clydesdale Bank.

“That’s from the outside in, where somebody seeks to acquire us. Equally, there’s potentially significant equity upside if we were a consolidator. As the largest full-scale SME (small and medium enterprise banking) challenger, that’s a very viable option too,” he told Reuters in an interview.

“We would be open-minded to it. In the short term we’re not going to be focused on prioritizing any consolidation, but we’ll keep an open mind and watch the market dynamics.”

Spain’s Sabadell (SABE.MC) this year snapped up TSB, the British lender that had been spun off by Lloyds (LLOY.L) less than a year earlier.

NAB said it plans to give about 75 percent of the shares in Clydesdale to existing NAB shareholders and sell the remainder to institutional investors. Clydesdale will be listed in Australia and London.

Duffy, who became CEO in June, said the shares will probably be sold at a discount to book value, which is estimated to be between 2 billion pounds ($3.06 billion) and 2.5 billion pounds and will be finalised later in the process.

Clydesdale, which NAB bought in the late 1980s, has been plagued by bad debts and misconduct charges. But NAB is providing 1.7 billion pounds of capital as part of the demerger to cover possible losses and Duffy said the British bank’s turnaround was on track.

“There’s always more to do, but the indemnity against legacy conduct issues is rock solid, the health of the business is good and lending and deposits are up — and that’s evidence that customers are reacting well to the bank,” he said.

($1 = 0.6538 pounds)

Editing by David Goodman

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