NAB’s Scottish arm may cross border after independence vote

NATIONAL Australia Bank has joined Britain’s biggest lenders in threatening to dump its Scottish base.

Moving Glasgow-based Clydesdale south in the event of a yes vote could cost $200 million. Picutre: Bloomberg

NATIONAL Australia Bank has joined Britain’s biggest lenders in threatening to dump its Scottish base should the public vote for independence.

Such a move could cost shareholders almost $200 million. Following similar moves by Lloyds and Royal Bank of Scotland, NAB yesterday unveiled its “contingency plan” for its Glasgow-headquartered subsidiary Clydesdale Bank upon a “yes” vote in the Scottish independence referendum next Thursday.

NAB said it would seek registration as an English company, addressing “some of the uncertainties and risks” surrounding the potential separation.

“This contingency plan gives our Clydesdale and Yorkshire Bank customers increased certainty about the ongoing success and stability of the bank,” said NAB chief Andrew Thorburn, who took the reins from Cameron Clyne last month.

In a note this week, Credit ­Suisse analysts said establishing a head office in England would cost NAB about $180m, almost half of the British operation’s expected full-year 2015 earnings.

The comments came as Lloyds revealed plans to move its legal headquarters to London from Edinburgh in the event of a yes vote, and RBS pledged to register its legal headquarters in England.

Mark Carney, the Governor of the Bank of England, this week also upped his warning against an independent Scotland being able to keep the pound, reportedly telling a conference it was “incompatible with sovereignty”, as seen with some countries in the euro.

While NAB confirmed the contingency plan after the market closed, its shares fell 13c to $34.42 yesterday, continuing a downward spiral this month as the pro-independence push gains momentum. On the weekend a YouGov survey found 51 per cent support for independence, despite warnings from business and analysts about the dangers of breaking the old union.

Capital outflows could be sizeable — leading to a spike in bad debts for banks — and it remains unclear if Scotland would keep the pound, remain in the European Union and how its financial services industry would be regulated or bailed out in a crisis.

The pound has been sold off by investors this month amid the rising uncertainty.

In a statement, Britain’s Treasury said the plans to relocate to London in the event of a yes vote were “understandable”.

Citi analysts said banks that remained based in Scotland would face “serious questions” about their cost of funding, the safety of their deposits, compliance costs and taxation.

Credit Suisse also warned that capital outflows from Scotland could lead to an “unexpected increase” in bad debts on Clydesdale’s Scottish credit exposures, which make up 22 per cent of the bank’s total loans.

NAB said re-registration in England was subject to regulatory approvals and other requirements, with the timing and cost yet to be determined. Clydesdale, founded in Glasgow and bought by NAB in 1987, has about 300 branches in Scotland and northern England, areas which have struggled with weak growth since 2008.

The muted returns have long weighed heavily on the group, putting pressure on Mr Thorburn to sell the bank after years of pain for shareholders. But analysts believe Scotland’s vote — along with uncertainty about misconduct charges — makes a sale impossible until next year.

“While NAB’s exit from the UK might be long-dated in any scenario, Scottish independence would arguably rule out the prospect near-term (particularly while currency arrangements are being resolved),” the Credit Suisse analysts said.

Citi analyst Craig Williams yesterday forecast NAB would unveil £495m ($871m) of British conduct provisions at its coming full-year result, including £245m flagged last month. NAB’s new management team was also under pressure to “press the reset button” and write down intangibles in its wealth arm and previous technology investment, Mr Williams said.

ADDITIONAL REPORTING: The Wall Street Journal.