The float and demerger of the Clydesdale bank is expected to mean a significant accounting loss for the National Australia Bank.
According to NAB calculations, the value of shares distributed to NAB shareholders and IPO proceeds may be less than book value.
The loss, partly due to foreign exchange movements, will be between $1.713 billion and $4.665 billion depending on the multiple of Clydesdale’s group net tangible assets, currently $5.902 billion, used for the demerger and IPO.
But this won’t impact the NAB’s cash earnings or its dividend paying capacity, according notes of a presentation today by Craig Drummond, NAB’s group executive finance and strategy.
The price of shares in the demerger and float won’t be known until February.
Here, according to the NAB, is the range of possible net asset valuations:
The NAB’s plan is to give 75% of Clydesdale to NAB shareholders in the form of shares and sell the remaining quarter in to institutional investors. Shareholders will get one Clydesdale share for every four they hold in the Australian bank.
The business is worth somewhere between $3.4 billion and $4 billion depending on the earnings multiple to be decided.
The float is part of the NAB’s strategy to get rid of non-performing assets and concentrate on the business in Australia and New Zealand.
UK authorities require capital support of £1.7 billion ($A3.6 billion) to cover any future claims against the business for “miss-selling” insurance products to small businesses.
This was part of the reason why NAB raised $5.5 billion this year, the biggest capital raising in Australian company history. The other reason is to meet stricter capital rules designed to make Australian banks safer from any future financial crisis.