Australian bank eyes up more UK acquisitions

National Australia Bank, the parent of Glasgow-based Clydesdale Bank, is expected to go on an acquisitions spree in the UK market once it obtains a separate listing for its European operations later this month.

The move, which was exclusively revealed in the Sunday Herald on April 16, will give the Australasian group an "acquisition currency that is stronger than the Australian dollar," according to NAB chief executive Frank Cicutto. Cicutto, who became chief executive in May 1999, has indicated he expects to be spending "more time in the northern hemisphere".

The bank wants to gain access to a major capital market such as London to improve the marketability of its shares and achieve a rating comparable with its peers.

The bank believes it has become strategically boxed in while its centre of gravity remains in Melbourne. The move will give NAB additional firepower to pursue acquisitions in the UK and Ireland. Potential bid targets include Alliance & Leicester, Bradford & Bingley, Bank of Ireland, Abbey National and Bank of Scotland.

According to one Clydesdale insider, the move will see Clydesdale and Yorkshire Banks listed as one entity, with NAB's other two European subsidiaries, Ulster-based Northern Bank and National Irish Bank, obtaining a separate listing on the London exchange.

There have been suggestions that the latter group may be sold off in order to fuel the expansion of Clydesdale/Yorkshire axis. However, many people north of the Border have been critical of Clydesdale's constantly changing strategy over the past two years which has seen stagnant growth.

The Clydesdale/Yorkshire businesses were demerged in May 2000 with Stuart Grimshaw becoming chief executive of Clydesdale/Yorkshire and Don Price becoming chief executive of Northern/National Irish.

The separate listings should be obtained before October 20, according to City sources. National Australia Bank may raise additional funding by selling off its US subsidiary, Michigan National. But it would be a reluctant seller since this operation is highly valued as a listening post for the US market, where online banking is far more developed than elsewhere in the world.

Since March, the Aussie bank has been in discussions with the Australian Prudential Regulation Authority and the UK's Financial Services Authority. The dual listings will give National Australia Bank legally distinct securities listed in London and Australia, although arrangements are expected to be made to give its existing shareholders exposure to the group's assets.

Earlier this year, Grimshaw, who became chief executive of Clydesdale/Yorkshire in May, said he wanted to integrate his Leeds- Glasgow outfit even further with its NAB parent. But at the time he seemed unclear as to whether NAB would want to retain majority control.

NAB is the largest employer in the financial sector in Glasgow, with 3200 employees within the city boundary. The bank recently ramped up its presence in the structured finance market. David Peebles, head of Treasury at Clydesdale Bank, set up an operation in Edinburgh focused on the top 300 UK plcs and debt finance deals of more than #20 million. Significantly, his operation was launched under the NAB banner.

Mark Prentice, head of corporate banking at Lloyds TSB Scotland, said: "The biggest battle they seem to be fighting is internal. It's a bit like the fights Bank of Scotland used to have with British Linen Bank. They are fighting each other when they should be fighting with us."

Nick Garbutt, head of corporate relations at NAB, said: "We cannot comment on speculation about acquisitions or on plans to restructure our shares."

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