The £1.7bn package, outlined in Clydesdales’ full year results ended 30 September, satisfies a condition laid out by the Prudential Regulation Authority (PRA). The PRA specified NAB must provide funding for the bank to cover any potential future losses arising from payments made to customers for misselling. The provision had to be set aside in order for the PRA to approve the demerger.
The capital support package includes an allowance of £465m which covers £390m for Payment Protection Insurance and £75m for interest rate hedging products and fixed rate tailored business loans.
NAB announced its plans to demerge with Clydesdale Bank in May. A holding company for the bank, CYBG, has been created with plans to launch an Initial Public Offering (IPO). It plans to sell approximately 75% of CYBG shares to existing NAB shareholders with the sale of the balance of CYBG shares by way of an IPO (up to approximately 25%) to institutional investors.
The bank said ‘significant’ progress had been made to prepare for the transaction including advanced talks with key regulators.
A statement in its results read: “CYBG is well positioned to be demerged to NAB shareholders and sold to investors as a stand-alone retail and business bank with strong market shares across its core regions in the UK.”
NAB plans to list CYBG on the London Stock Exchange.
The demerger and IPO remains subject to regulatory approvals and NAB shareholder approval which is expected to be sought at a NAB shareholder meeting in January 2016.
The results showed UK mortgage lending growth of 11.2%, to £20.5bn which led to an increase in market share by 14 basis points to 1.61%.