Banking major National Australia Bank Ltd. (ASX: NAB) has made its intentions clear that it wants to sell its United Kingdom-based Clydesdale Bank in the future. It could get its chance to sell this year with Fitch Ratings affirming the bank's 'A' rating.
The UK business has been a nightmare for NAB since its acquisition. Bad debts associated with the business were one of the largest contributing factors to the $1 billion profit decline for NAB in 2012 and although it has been improving in recent times, it has still acted as a drag on the bank's overall earnings.
Despite its intentions to sell, NAB has still been providing the business with a high level of support which is likely to continue until a buyer is found, according to Fitch. What's more, NAB transferred Clydesdale's problematic commercial real estate portfolio onto its own balance sheet, while also undertaking a major restructure (which included branch closures and job cuts) to make it more attractive to prospective buyers.
An improving economic environment in the UK could help boost NAB's chances of disposing of the business this year.
Due to the pain the UK divisions have caused for NAB, shareholders would react positively if the bank were to sell it at a reasonable price. NAB's shares fell by 0.5% on Thursday, while its peers, namely Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA), fell between 1% and 1.5%.
Foolish takeaway
Each of the banks climbed strongly in 2013, driving the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) to a 15% gain for the year. However, in this Fool's opinion, each have run their race and at today's prices, stand little chance of delivering market-beating returns.
If it was the bank's generous dividends that you were particularly interested in, investors could instead consider buying shares in Telstra Corporation Ltd (ASX: TLS) which currently boasts a fully-franked dividend yield of 5.5%, or other companies with enormous growth potential such as M2 Telecommunications Group Limited (ASX: MTU), which offers a yield of 3.6%.
