Cantillon: Clydesdale is eyeing listing in early February

This week’s global stock market wobble, caused largely by concerns over China’s economic performance, shaved trillions of dollars off shares value and will have forced those companies pondering an IPO to re-evaluate their options.

Among them will no doubt be Clydesdale Bank, the Scottish financial institution run by Irishman David Duffy (pictured right), which is eyeing a listing in early February as part of a plan by its parent group, National Australia Bank, to offload its UK subsidiary.

Duffy and his colleagues are due to begin investor roadshows on January 18th in London, New York and Australia. The former AIB boss will be hoping the events of this week will prove to be a blip and that some stability will return to trading in the intervening period, but this might be wishful thinking.

Duffy will seek to promote Clydesdale’s 175-year history, its 315 branches and business centres, 2.8 million customers and 18 million catchment area between Scotland and Yorkshire (it also operates Yorkshire Bank). It’s also being pitched as a challenger to the bigger players in the market, although this is becoming a crowded space.

On the flip side, Clydesdale is a small player in the UK banking market, has suffered significant legacy conduct costs in recent years, and has a high cost-income ratio of about 75 per cent (AIB’s target is less than 50 per cent).

Given that NAB wants rid of Clydesdale, pricing the IPO might not be the same issue for the bank as it would for most other companies lining up a stock market listing. The plan is to sell 25 per cent of the bank to institutional investors with existing NAB shareholders getting shares on a pro-rata basis for the other 75 per cent.

NAB shareholders are due to vote on the Clydesdale proposal on January 27th with shares slated to begin listing on February 2nd. Regardless of whether the IPO goes ahead, Clydesdale will demerge from its Australian parent.

Under that scenario, shareholders would continue to receive 75 per cent of the Scottish bank with NAB holding the balance pending an IPO at a future date or some other transaction.

If Clydesdale’s IPO were to be delayed, let’s say until the autumn of this year, then Duffy could find himself competing for investors’ attention with a certain Ballsbridge-based bank that he once led.