Why Thorburn will be good for National Australia Bank Ltd

The UK divisions must go and momentum needs to continue.

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Shares in National Australia Bank Ltd (ASX: NAB) edged slightly higher over the last week following news that CEO Cameron Clyne would be retiring from executive life at just 46 years of age, to be replaced by Bank of New Zealand boss Andrew Thorburn.

While the retirement of Clyne and the promotion of Thorburn may have come as a surprise to most of the market, Thorburn is thought to be a good choice for the top job. His leadership style has been compared to that of Commonwealth Bank of Australia's (ASX: CBA) Ian Narev, while he has also been described as an "outstanding banking executive" who has done a "superb job of leading Bank of New Zealand since 2008".

Given that any change in management can introduce new business risks, the market was cautiously optimistic regarding the announcement. However, the incoming CEO announced that he would focus on cleaning up the bank's disastrous UK divisions while also implementing an aggressive digital strategy to boost the performance of Australian retail and business banking which would bode well for shareholders.

Struggling overseas

The UK divisions have, for a long time, acted as a drag on the bank's overall earnings which has seen NAB lag behind its major competitors, namely Commonwealth Bank, Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ).

While a deadline has not yet been set for their sale and it remains unclear what NAB would do with the proceeds from the UK businesses, the bank is expected to sell them as soon as a reasonable offer is made. It is said to want to receive £2.4 billion in total.

Conditions are improving in Europe which will make the divisions more attractive (particularly given that NAB has been investing in the divisions), but there are plenty of other bank assets for sale too which could mean a longer sale process.

Australian division

It is vital that Thorburn maintains the bank's momentum when he takes over the role on August 1. He has highlighted the importance of the bank's digital strategy given the growth in online and mobile banking to continue addressing customers' changing needs.

Investors will also be making sure that the bank's home loan book and mortgage market share continue to grow under the new management.

Foolish takeaway

Unfortunately for investors, none of the banks are presenting as attractive investments at the moment. While each of them are amongst Australia's strongest businesses, they have become overpriced following their rallies in 2013 and stand little chance of delivering market-beating returns at today's prices.

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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