National Australia Bank's (ASX: NAB) prospects of selling all or some of its British businesses this year are looking better as the macroeconomic environment in the UK continues to improve.
NAB's UK businesses have acted as a drag on the bank's overall performance in recent years. In fact, massive write-downs on bad loans from the businesses were to blame for NAB's profit falling by $1 billion in 2012. NAB will not sell the businesses for any price and, although things began to stabilise in 2013 following a major restructure of the entire UK arm, it remains committed to selling the franchise. This was confirmed by NAB's chairman Michael Chaney at the bank's annual meeting in December, he stated that they "may well dispose of the business in the future."
With the Bank of England issuing higher growth forecasts, the chance that a buyer could emerge for NAB's Clydesdale and Yorkshire banks is now looking greater. The Bank of England forecast that funding costs for the country's banks should fall substantially while the economy could grow by up to 3% this year, which is up from just 2% in 2013.
Should NAB prove unable to sell the businesses, it is expected that they will instead continue to strengthen them to make them a more attractive prospect. Macquarie Group (ASX: MQG) analyst, Michael Wiblin, said the group would likely "prime it for sale through organic growth, or look to sell the remaining commercial real estate portfolio given improved valuations."
On a negative note, JP Morgan analyst, Scott Manning, highlighted that both Clydesdale and Yorkshire banks had a large presence in northern England, which hadn't recognised significant economic growth. This could impact the prospects of a sale.
Foolish takeaway
Together with Westpac (ASX: WBC), ANZ (ASX: ANZ) and Commonwealth Bank (ASX: CBA), NAB shares soared in 2013 as investors sought out high-yielding dividend stocks. While a sale of NAB's UK businesses would likely see shares increase in value, each of the banks have become overpriced and remain unlikely to deliver market-beating returns in the long-run. As such, investors should look for other available opportunities.
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