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NBNK, headed by a group of City big hitters and former politicians, views control of the banks as a jumping off point to buy 632 branches that Lloyds Banking Group has been forced to sell
Shares in a company seeking to become a new force in British banking were suspended on Tuesday amid speculation it is days from announcing a £1.5bn takeover of Yorkshire and Clydesdale banks.
NBNK, headed by a group of City big hitters and former politicians, views control of the banks as a jumping off point to buy 632 branches that Lloyds Banking Group has been forced to sell to comply with European competition rules.
Yorkshire and Clydesdale are owned by National Australia Bank (NAB) and together have 339 branches in the north of England and Glasgow. NAB chief executive Cameron Clyne has intimated he is not against the idea of a sale, as long as it is in the interests of shareholders.
NBNK's chief executive is Gary Hoffman, a former chief executive of Northern Rock, while other directors include Sir David Walker who headed up Morgan Stanley International, and John McFall, a former chairman of the House of Commons Treasury committee. The chairman of NBNK is Lord Levene, one-time head of Lloyd's of London insurance market.
The company launched as a shell investment vehicle a year ago with shares priced at 100p on the Aim market, raising around £50m. But investors are understood to have pledged to stump up an extra £8bn to fund acquisitions and provide a capital buffer in the event of expansion.
An acquisition of Yorkshire and Clydesdale would give NBNK a banking base from which it would be easier to merge with the Lloyds' branches, as well as furnish it with assets worth £45bn.
Analysts expect the NBNK deal with NAB's UK operations to go ahead, but they were less sure whether it would win the auction for part of the Lloyds network, expected to fetch £2bn. Rival bidders are circling with the Co-operative Bank and Sun Capital Partners, headed by entrepreneur Hugh Osmond, among potential purchasers.
But one observer said: "A takeover of Yorkshire and Clydesdale raises NBNK's profile and gives it a better chance of convincing the authorities and Lloyds directors that it means business."
NBNK cannot currently bid for Northern Rock because it was banned from doing so for 12 months when it took on Hoffman in November 2010. Nationalised by the government in 2008, Northern Rock was put up for sale in June. So far, only two bidders have expressed an interest in buying it: Virgin Money and JC Flowers, the private equity group, headed by former Goldman Sachs banker Christopher Flowers.
Sources say the sales process, which was expected to be completed by the end of the year, ground to a halt during the summer as the Rock's financial adviser, Deutsche Bank took stock of the situation.
Analysts say the uncertain economic backdrop and turmoil in the eurozone mean the government may not achieve the £1.4bn that it injected into the mortgage lender to keep it afloat during the financial crisis. Virgin and Flowers are thought to have offered £900m.
In July, Northern Rock boss Ron Sandler said the lender will not return to profitability until the second half of 2012. The bank reported a loss of £78.8m in the first six months of 2011. This was in line with expectations and down on the loss of £140m it reported in the first half of 2010.
Richard Wachman
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