AS National Australia Bank moves ahead with the hard sell of the partial US listing of its Great Western Bank, it is worth considering what a listed entity would look like.
It seems NAB is moving at a time when IPO conditions for small US-based banks appear close to ideal.
Recent IPO transactions, where a minority stake was offered, have been priced around 1.6 times to 1.7 times tangible book value, according to numbers crunched by brokerage Citi. The issues have also been relatively well supported in the secondary market.
Late on Friday, NAB lodged a prospectus with the US Securities and Exchange Commission, outlining plans to sell 16 million shares in Great Western, or 27.6 per cent of the outstanding share base. Pricing for the IPO is expected to be between $US21 and $US24.
This would raise $US336 million-$US384m ($386m-$440m), valuing Great Western on par with its $1.55 billion book value.
Four small US banks are likely to act as a barometer for Great Western: Green Bancorp, FCB Financial Holdings, C1 Financial and Opus Bank.
Of these, Texas-based Green has probably been the better performer for investors, with its shares last trading at $US17, compared with its August listing price of $US15. This puts it on a price-earnings multiple of nearly 23 times. Elsewhere, the $US270m C1 Financial is trading at a hefty 30 times multiple, although its shares are trading at $US18.05, just above the $US17 listing price.
The bigger Opus Bank is trading at 53 times current year earnings, but its shares are trading at a slight discount to the $US32.50 August listing price.
Analysts are tipping NAB to move ahead with a full exit by the end of next calendar year to meet the deadline for bank regulator APRA’s capital rules around domestic systemically important banks.
Ahead of the US bookbuild, joint lead underwriters Merrill Lynch and Deutsche have embarked on a whirlwind two-week roadshow to sell the merits of the Midwest institution, which has 162 branches in seven states.
According to the prospectus, Great Western generated $US77m of cash earnings in the nine months to June 30, compared with $US70m previously. NAB intends to list the shares on the New York Stock Exchange by the end of the month.
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