NBNK’s options narrow as NAB stays put in UK

NBNK Investments is under renewed pressure to close a deal with Lloyds for 600 branches after National Australia Bank said last night that it will not be putting its UK retail business up for sale.

NBNK is understood to be in talks with several Middle Eastern sovereign wealth funds to finance its bid for the Lloyds branches, which are now the only major high street banking business up for grabs.

NBNK, which is led by City grandee Lord Levene, had hoped to buy NAB’s British business if, as expected, NAB had decided to quit Britain. But NAB UK said last night that it will restructure its bank rather than offload it.

NAB’s decision means that if NBNK cannot edge out Lloyds’ current preferred bidder, the Co-operative Group, it will be left with few viable assets to go after. Lloyds’ exclusive talks with the Co-op collapsed recently, but NBNK has yet to take its place.

In a disappointment for Levene’s buy-out vehicle, NAB UK has said it will keep its 330 branches and their “frontline” staff but will lay off 1,400 other employees in the next three years. As part of the overhaul, NAB will also transfer a £6.2bn portfolio of troubled commercial real estate loans from its UK banks – Clydesdale and Yorkshire Bank – to their parent company for winding down.

NAB said it expects to save £74m a year by restructuring, but will incur up-front costs of £195m from “redundancy, software impairment, lease break fees and other costs”. Clydesdale Bank alone was also hit by write-offs of £141m in the first quarter of this year and NAB UK had to make an additional £120m provision to compensation customers who were mis-sold payment protection insurance.