National Australia Bank (NAB) yesterday announced the sale of an 80 percent stake in its insurance business to Japan’s Nippon Life for US$1.7 billion and outlined plans to divest troubled British asset Clydesdale Bank.
The lender tabled the moves in posting a 19.7 percent lift in annual net profit to A$6.34 billion (US$4.52 billion) for the year to Aug. 31 as it looks to bolster its balance sheet and provide a buffer to meet tougher regulatory requirements.
Cash profit, the industry’s preferred measure which strips out volatile items, rose 15.5 percent to A$5.84 billion, below expectations, with six-monthly dividends remaining at A$0.99. NAB shares ended 2.16 percent lower at A$31.72 in a generally soft market.
The bank confirmed the transaction for A$2.4 billion.
“Our wealth business has delivered significantly improved results since 2013, which has enabled us to secure the long term partnership we are announcing today,” NAB chief executive officer Andrew Thorburn said. “This partnership will enable us to continue to deliver insurance solutions to our customers while improving wealth returns for shareholders.”
OptionsXpress analyst Ben Le Brun said shareholders should be happy with the outcome.
“In terms of the price tag, I think the market will be quite comfortable with that, even quite pleased,” he said.
NAB also announced a timetable for a demerger and initial public offering (IPO) for its poorly-performing British business Clydesdale Bank, which was acquired in 1987, as it looks to focus on core Australian and New Zealand arms.
Thorburn said NAB planned to spin off 75 percent of the asset to NAB shareholders while the remaining 25 percent would be sold through an IPO to institutional investors in February next year.
“Significant progress has been made on the proposed transaction, including advanced engagement with key regulators and listing authorities in both jurisdictions,” he said.
The primary listing for Clydesdale will be on the London Stock Exchange.
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