Blackfriar: Yorkshire Bank looks like a pawn as the ratings drop

Ratings agency Moody’s yesterday reacted to comments by a senior director at its Australian parent that it may sell the bank by slashing its credit rating.

With Yorkshire and its sister bank Clydesdale on the block, Moody’s speculated National Australia Bank is somewhat less committed to the brands than it has long argued.

Moody’s slashed the banks’ credit rating to A2 from A1 and warned a drop to A3 is feasible.

“The rating action reflects a reduction in Moody’s view of the likelihood of parental support for Clydesdale from its parent,” said the ratings agency.

“In Moody’s view the discussion about a potential sale of Clydesdale in the future raises questions about the long-term strategic commitment of NAB to the UK market.”

Mark Joiner, NAB’s executive director for finance, is the man who recently stoked speculation by suggesting the bank is open to a sale.

A round of swift rebuttals followed yesterday from NAB chief executive Cameron Clyne and UK CEO David Thorburn.

“Our shareholders’ interests require that NAB considers all potential options but NAB’s focus on organic growth has not changed, nor has the nature of the group’s support for our UK business,” said Clyne.

Thorburn added: “Strong in our own right, we remain part of one of the strongest banking groups in the world.”

When Thorburn was announced as the replacement for Lynne Peacock earlier this year, Blackfriar suggested the year ahead would be anything but boring for Yorkshire Bank. So it is proving.

Hoisting the ‘for sale’ sign above Yorkshire Bank may have the unintended consequence of making it tougher for the bank to raise money on the wholesale money markets, making it less attractive to investors and more expensive to issue debt.

However, it has also given encouragement to other types of investors – those who want to be players in the UK’s new banking order.

When Yorkshire and Clydesdale withdrew from the auction of more than 630 Lloyds branches earlier this year, they became a takeover target themselves.

NAB has been under constant pressure to beef up or sell its UK operations, and the shake-up of UK banking could give NAB the exit it has long appeared to crave.

Two potential bidders, Sun Capital and NBNK Investments, need a solid foundation on which to build their bids for more than 630 Lloyds branches.

The banks offer this with infrastructure, a national network, and two solid and untarnished brands.

Meanwhile, the banks’ staff were yesterday hit with sweeping changes to its pension schemes. In an interestingly-timed announcement, some 4,000 staff were told they will have to pay into their pensions for the first time or accept lower benefits.

This will further streamline the banks, making them even more attractive to a buyer.

n This week retail veteran Allan Leighton described Morrisons’ chief executive Dalton Philips as “great with people and ideal for Morrisons right now.

He has great judgment, people are keen to work with him and underneath it he’s a very smart retailer”.

Since he was parachuted in 18 months ago, no-one could accuse Philips of resting on his laurels. He has revamped just about every part of Morrisons and has met with approval from city critics and shareholders.

Analyst Clive Black, at Shore Capital, said: “In transparently difficult times Morrisons is steering a good course and management deserves credit for the sustained performance and progress that is being made.”

So far this year Philips has launched a convenience store trial, with the first M local shop opening in Ilkley. He has also implemented a £3bn investment in an online shopping operation, which was kick-started with the acquisition of online retailer Kiddicare for £70m.

He paid £32m for a 10 per cent stake in New York online grocer FreshDirect, one of the few profitable online food operations in the world, with the aim of launching a similar operation in the UK.

This week we saw the first stage of a major relaunch of Morrisons’ multi-billion pound own label range.

The supermarket chain has trailed behind its rivals in own-label sales and Philips is keen to embark on a total overhaul.

Morrisons’ offering was looking tired, especially in comparison to Leeds-based Asda, which successfully relaunched its mid-tier range as ‘Chosen By You’ last year. The jury will remain out until we see just how good and how cheap Morrisons’ new own label range is.

Commercial director Richard Hodgson has promised “M&S quality at Asda prices”.

If anyone can pull this relaunch off, Morrisons can.