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.