By Danny John
THE National Australia Bank is set to rule out any immediate sale or expansion of its UK division this week as the crisis in the British financial services industry deepens following the need to take another of the country's banks into state control.
The dire straits of the British banking sector has restricted NAB's room to manoeuvre in forging a definitive longer-term direction for its Clydesdale Bank and Yorkshire Bank franchises, with the group opting to stick with the two regional businesses for the immediate future.
NAB's new chief executive, Cameron Clyne, who succeeded John Stewart on January 1, will tell investors on Thursday at the unveiling of his new strategy for the group that the bank has chosen to bunker down in Britain for the foreseeable future.
That is likely to last for as long as two years while Britain recovers from the damaging effects of the global financial crisis. This has seen two of its top four banks seek the shelter of government ownership after racking up losses of tens of billions of pounds because of their exposure to "toxic assets".
Lloyds Banking Group, which only earlier this year came to the rescue of the troubled lender HBOS, agreed at the weekend to the Government increasing its stake in the revamped company to 65 per cent in return for it insuring £260 billion ($575.5 billion) of its riskiest assets.
The move was partly forced on Lloyds after HBOS made a record pre-tax loss of £10.8 billion last year and wrote off £9.9 billion worth of bad loans. HBOS's troubles caused it to sell BankWest to the Commonwealth Bank for $2.4 billion last year, which saw the British lender take a $1.85 billion loss on the deal.
The weekend's events saw Lloyds join the Royal Bank of Scotland in majority state control. RBS is now 70 per cent owned by the Government, having taken out "insurance" under the asset protection scheme to cover bad assets worth £325 billion.
Both Lloyds and RBS have, in return, guaranteed to pump £53 billion into the economy to underpin the lending needs of businesses and consumers hit by the global credit crunch.
The effective nationalisation of the two troubled groups leaves Barclays and HSBC as the only British high street banks not controlled by the state.
NAB's subsidiaries have so far avoided the dire problems encountered by the big banks and a number of smaller regional institutions, including Northern Rock, the first British bank to suffer a run on its finances in modern times. That caused it to fall into the Government's hands last year.
Mr Clyne will seek to ease investors' concerns that the Yorkshire and Clydesdale banks are in the best shape they have been in under NAB's ownership.
He will also state that they are performing better than their peers in what he will readily admit is the worst market in modern times. NAB is the only one of the big four Australian banks with a sizeable retail branch and domestic lending presence in the British market.
with AFP