With the scheduled referendum just one week away, Credit Suisse’s equity research team has issued a paper outlining the risks facing NAB by way of its British banking assets should a ‘yes’ vote be successful.
“We see the key impacts of a successful Scottish independence vote as negative but manageable for NAB, with potentially adverse implications for restructuring (head office) costs, NAB's Scottish bad debt charge, and the prospects for NAB's ultimate divestment of its UK business,” the paper concludes.
Specifically, it warns that there may be logistical concerns associated with relocating the NAB-owned Clydesdale Bank from Glasgow to England, such as significant temporary duplicate costs and scale-down costs.
Credit Suisse anticipates that a yes vote would inevitably result in re-domiciling to England for many Scotland-based fund managers and banks, including physical relocation of key personnel and possibly back-office equipment, rather than “merely a legal entity restructure”.
In addition, the research paper suggests that Scottish independence would effectively “rule out” the prospect of NAB exiting the UK market in the near term, should the bank adopt an exit strategy, due to increased risk of “bad debt”.
“Our UK economists believe that a successful Scottish independence vote could trigger a negative financial and economic loop, creating a profound risk to Scottish financial system stability,” the paper states.
“Accordingly, they see Scotland's large financial sector as the potential catalyst for financially and economically destructive capital flows if independence – and different currency arrangements – becomes a real likelihood.”
NAB chief executive Andrew Thorburn has also anticipated a number of consequences for the bank if a yes vote is returned on 18 September.
“The Scottish Independence vote takes place on 18 September and a vote in favour of independence may give rise to significant additional costs and risks for Clydesdale Bank,” Mr Thorburn said during the bank’s third quarter trading update.
“We continue to closely monitor the situation and have appropriate contingency planning in place.”
