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NAB flags more asset sales as it exits Britain

NAB chief Andrew Thorburn. Photo: Josh Robenstone NAB chief Andrew Thorburn. Photo: Josh Robenstone
NAB’s new chief executive Andrew Thorburn✓ said there was “a lot at stake” as NAB sought to exit from Britain, and that while more asset sales should be expected following its $1.2 billion property deal last week, the timing for such transactions remains uncertain.

“We have the CRE [commercial real estate] book running off fast, we sold a tranche [last week] and we’ve got more to come," Mr Thorburn said during an interview on his first day in the job on Friday.

“Ultimately, this is a non-core asset for us - as our focus is on Australia and New Zealand and on customers that trade into Asia. We need to address [the UK] and clearly it is a concern, and it’s difficult and it’s producing low returns.

"So this will be a focus for us - to run that down and ultimately exit - but I want to do that at the right time, not at a particular time.”

NAB’s property exposures in Britain have been a perennial drag on NAB’s share price since the global financial crisis exposed bad lending decisions. Mr Thorburn’s predecessor, Cameron Clyne, spent significant chunks of his time restructuring the UK assets to prepare them for sale.

Last week, NAB  sold a £625 million ($1.13 billion) parcel of distressed commercial property loans to New York-based buyout group Cerberus Global Investors.The sale means its portfolio of troubled UK commercial property loans, which are held on the group balance sheet, is now worth £2.38 billion, down from more than £5 billion in early 2013.

Goldman Sachs analyst Andrew Lyons said in a note last week the financial implications of last week’s sale were relatively immaterial but “the sentiment impact is potentially more meaningful … to the extent that [the] transaction represents the first step in management’s attempt to accelerate the run-down of legacy and low-returning assets - we think it should be well received by the market.” Goldman Sachs says exiting the UK portfolio of businesses could add up to 3 per cent to earnings per share over the next couple of years.

Hopes are growing NAB may soon sell its Yorkshire and Clydesdale banks, which analysts reckon could be floated as soon as early next year.

But several uncertainties remain.

Scotland will hold a referendum next month on secession from Britain, a move that would spark financial upheaval and raise significant risks for banks. A vote in favour of independence could include changes to the currency, doubts about implicit government ­support of banks and higher costs. A lot of banking documentation might also need to be redrawn if the vote goes through.

In his interview on Friday, Mr Thorburn also acknowledged “conduct issues” plaguing the UK banking sector remained difficult.  

Last week, Lloyds Banking Group was accused of "highly reprehensible" behaviour by the Bank of England, after being found to have rigged interest rates to cut the fees it owed to a ­taxpayer-funded rescue scheme during the financial crisis.

Mr Thorburn said: “There’s a lot at stake here, it is a focus for me, but I want NAB to focus on customers in Australia today and be hungry and committed to that.

“We will work through the UK as a separate legacy issue and we will deal with it, but we will deal with it in the right way at the right time.”

Author: James Eyers
Source: Sydney Morning Herald

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