NAB shareholders should vote in favour of the demerger of UK subsidiaries Clydesdale Bank and Yorkshire Bank in order to make NAB a "more profitable and focused" business, says Morningstar.
A resolution to demerge Clydesdale will be put to shareholders at a scheme meeting scheduled for 10am on 27 January 2016.
If the vote is successful, NAB is expected to demerge its UK banking group effective 8 February 2016.
According to Morningstar senior equity analyst David Ellis, NAB is seeking to undertake an in-specie distribution to NAB shareholders of 75 per cent of the shares in new holding company CYBG PLC which, following the demerger, will own NAB's Clydesdale and Yorkshire Bank operations.
Eligible NAB shareholders will receive one Clydesdale share for every four NAB shares held.
"In addition, the bank intends to sell the remaining 25 per cent of Clydesdale by initial public offer to institutional investors," Mr Ellis said.
Morningstar has argued "for several years" that NAB should dispose of its UK banking assets, said Mr Ellis – and the research house recommends shareholders vote in favour of the demerger at the scheme meeting.
"We endorse the [NAB] board's recommendation to proceed with the demerger and when complete, the disposal will reduce risk and complexity within NAB's Australian and New Zealand businesses," said Mr Ellis.
"Managing the UK banking assets has been a challenging and time-consuming task for NAB and an expensive experience for bank shareholders.
"NAB shareholders have waited a long time for a complete exit from the UK and we expect them to be rewarded with higher returns from the bank's more profitable Australian and New Zealand banking franchise," Mr Ellis said.