NAB to raise £1bn
YORKSHIRE Bank owner National Australia Bank today revealed it is to raise £1bn to strengthen its balance sheet as it said its UK banking operations continued to experience a difficult market.
The group, which owns Yorkshire and Clydesdale banks in the UK, said that the fully underwritten equity capital fundraising of 2bn Australian dollars (£1bn) would increase its ratio of equity capital to assets from 8.2% to 8.8% and help “maintain a strong capital position through the economic cycle”.
In its third quarter trading update announced today, NAB said that its UK banks were operating in a difficult market but had seen revenue in the three months to the end of June grow “strongly” thanks to improved margins and the lower spread between the Bank of England’s base rate and the three month LIBOR rate – the interest rate at which banks borrow money.
It said that asset quality measures deteriorated, particularly in its business portfolio, reflecting contraction in the UK economy. Its mortgage portfolio saw an increase in the number of customers who were more than 90 days overdue with their payments to 0.93% over the quarter from 0.75% but this was still less than half of the UK Council of Mortgage Lenders average of 2.39% at the end of March 2009.
UK retail deposits grew strongly, rising 4% during the quarter. Gross new lending advances were £1bn in the quarter.
NAB said that it had unaudited cash earnings of approximately $0.9bn Australian dollars (£445m) during the quarter as its performance “remains solid”.
Chief executive Cameron Clyne said: “Our businesses continue to deliver solid performance despite the subdued economic environment. Furthermore, we continue to see significant opportunities in the SME and institutional segments.
“This capital raising not only ensures we maintain a strong balance sheet position, but also provides us with the flexibility to support our existing customers, accelerate initiatives to enhance our SME market position, and pursue additional organic and strategically aligned inorganic opportunities.
“Adding strong capital to our already strong funding and liquidity positions supports our strategic agenda,” he said.
