National Australia Bank Ltd moves closer to exiting UK market: Is it time to buy?

With a keen focus on the local market, National Australia Bank Ltd (ASX:NAB) has divested another big portion of its bad UK commercial loan portfolio.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Since getting into the top job at National Australia Bank Ltd (ASX: NAB) in August, CEO Andrew Thorburn has made a number of promising changes to our biggest bank by assets.

In less than five months Mr Thorburn has overseen the divestment of £625 million of bad UK commercial real estate (CRE) loans, successfully taken NAB's US bank to public markets, survived a Scottish independence vote, sustained $1.5 billion of essential write-offs and has today announced another £1.2 billion sale of loans in its CRE portfolio. It's fair to say, he hit the ground running.

And it's exactly what NAB needed.

For years NAB has been plagued by its underperforming UK business, which includes the Clydesdale and Yorkshire banking brands. In addition since 2012, when NAB integrated £5.6 billion of bad CRE loans into the main bank as a "run-off" portfolio, it has been focusing on ways to remove its foreign exposure altogether.

The agreement to offload approximately $1.9 billion of high-risk and defaulting loans to U.S. private equity firm Cerberus Global Investors, will form an integral part of NAB's exit from the UK. Mr Thorburn has previously hinted at taking the UK business to public markets, following the successful listing of its US subsidiary Great Western Bancorp Inc on the New York Securities Exchange in October.

In a media release today, Mr Thorburn said: "This is an important step forward, toward bringing closure to one of our legacy positions. The sale of these higher risk loans in the NAB UK CRE portfolio is another important milestone in our strategy of reducing our low returning legacy assets and sharpening our focus on our core Australian and New Zealand franchises."

Whilst the UK CRE portfolio's balance is still £836 million, it'll no longer be reported as a separate line item.

Buy, Hold, or Sell?

I've previously stated I wouldn't buy NAB shares until we're offered a much lower price and its exit from the UK is certain. Whilst I believe Mr Thorburn has been making the right calls early in his tenure, there's still some way to go. So I'm leaving NAB on my watchlist, for now.

Motley Fool Contributor Owen Raszkiewicz has no financial interest in any of the companies mentioned in this article. You can follow Owen on Twitter @ASXinvest.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »