LONDON: National Australia Bank, the country’s largest lender by assets, said it would raise A$5.5bn (US$4.4bn) in a bid to lift its tier one capital ratio and enable its exit from the UK banking market.
The company plans to issue 194m new ordinary shares at A$28.50 apiece. The move will reduce cash earnings per share for the March 2015 half of the year by 4.5 per cent, NAB said.
NAB is in the middle of a strategic upheaval, with plans to withdraw from its troubled UK businesses, Clydesdale and Yorkshire banks, to focus on its core operations in Australia and New Zealand.
Andrew Thorburn, group chief executive, said that the bank went ahead with the rights issue as a “strong balance sheet has always been a priority”.
“The capital-raising facilitates our proposed exit from the UK banking business and positions us ahead of anticipated regulatory changes,” he said.
The performance of Yorkshire and Clydesdale has weighed on NAB over recent years, as the UK units have suffered from bad property loans and claims of mis-selling of payment protection insurance and interest rate hedging products.
NAB said 70-80 per cent of Clydesdale would be demerged, with the remaining 20-30 per cent to be floated in an initial public offering to institutional investors. NAB added that it was still open to a sale of unit.
The bank is targeting an exit by the end of 2015 with a float on the London Stock Exchange. UK regulators have asked NAB to provide £1.7bn in capital support to cover any future legacy conduct costs related to mis-selling of financial products, a decision that prompted the bank to raise capital.
