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NAB’s lucky escape from Brexit

When NAB finally divested its UK holdings in February 2016, it was disappointed in the lower than expected valuation of Clydesdale and Yorkshire Bank. However, following Brexit NAB must be relieved it managed to divest even at a lackluster price.

Following decades of trying to make its stint in the UK a success, NAB finally divested its businesses in that market early in 2016. Although NAB didn’t raise as much as it had hoped through the flotation of its remaining 25% stake in Clydesdale Bank and Yorkshire Bank, it must be relieved following the Brexit referendum result.

With UK bank shares plunging to levels not seen since the global financial crisis, the loss for NAB would had been greater if it had hung on to Clydesdale Bank and Yorkshire Bank in the hope of securing a higher valuation. As the world tries to come to terms with Brexit, and with financial markets in jitters, it will not be surprising if the Bank of England reduces interest rates in the near future. This would’ve made an even greater dent in NAB’s UK operations, which had already been performing badly in the near-zero rate environment.

Additionally, under the current Brexit market situation it would also have been more difficult for NAB to offload the two banks, though it will still be a few years before NAB is able to settle its UK holdings completely.

Looking back to February 2016, NAB’s board must be glad it pushed ahead with the divestment even if it felt the market turbulence at the time had moderated the share price. Just a few days after the referendum, it seems NAB may have dodged a bullet.

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