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The Internationalisation and de-internationalisation of Nati
Transcript of The Internationalisation and de-internationalisation of Nati
The sell-off of international assets, and hence withdrawal from those international markets, has been described as a divestment of low-returning and strategically inconsistent assets.
Strategic - allows NAB to align their assets with their business strategy
Forced - rid itself of costly and underperforming international assets.
Strategic or forced??
NAB made further strategic internationalisation attempts in 2007 when they acquired Greater Western Bank for $US798 million.
Part of the strategy was a belief that they could double the banks earnings in the first three years after acquisition.
Expansion into American markets
National Australia Bank Group continued it's internationalisation by acquiring the majority shares in Clydesdale Bank in the UK in 1987
Clydesdale Bank was founded in Glasgow in 1838 and was owned by Midland Bank prior to its acquisition by NAB
Expansion into United Kingdom markets
- A firm's process of initiating or maintaining it's involvement in cross-border international business activities.
- Any voluntary or forced actions that reduce a company's engagement in or exposure to current cross-border activities. (Benito & Welch, 1997)
- The re-engagement in international operations by firms which have previously exited. (Welch & Welch, 2009)
Defining Key Terms
National Australia Bank Ltd.
Financial services organisation established in 1893
Has since become a strong banking brand, becoming known as one of the "BIG 4" Australian banks
Caters to the needs of 12,700,000 customers, with 42,000 employees operating more than 1,700 stores and business banking centres globally.
Now operates in several countries outside Australia, including New Zealand, the United Kingdom and the United States of America.
NAB's internationalisation strategy
In 1992 the National Australia Bank and the Bank of New Zealand agreed upon a partial merger, which now sees National Australia Bank Group's major financial services based in Australia and New Zealand.
However for the purpose of this presentation, we will be focusing on NAB's internationalisation and subsequent de-internationalisation from the UK and America
On the 29th August 2014, NAB Group announced its decision to begin exiting their Great Western stake fully.
The sell-off of GWB (which makes $US120 million a year profit) was a strategic decision, as the company intends to strengthen NAB's tier 1 capital ratio.
NAB's CEO Andrew Thorburn was quoted as saying;
"We have been clear that our strategic direction is to concentrate on building a stronger core Australian and New Zealand business and improving the experience for our customers. The IPO of the US-based Great Western Bank provides us with the opportunity to further focus our attention on our core business."
The process by which NAB began it's divestment of GWB began October 15th 2014.
On that day an Initial Public Offering was undertaken of Great Western Bancorp, Ltd.
The total offer comprised of;
18.4 million shares (31.8% of outstanding common stock)
$US18 per share
Gross proceeds of $US331 million.
A secondary offering was made on July 27th 2015
The secondary offer comprised of;
15.2 million shares (26.3% of outstanding common stock)
$US23.50 per share
Gross proceeds of $US335 million.
Great Western also agreed to purchase $US60 million worth of NAB's holding.
As of this month, NAB said it has now fully separated from Great Western after selling it's remaining 28.5% stake in a further offering.
NAB received a total of $US1.46 billion, which is a $US396 million loss compared to the US lenders book value
NAB Group is currently in the process of withdrawing from the UK market through a de-merger with Clydesdale Bank as well an institutional initial public offering.
The NAB-Clydesdale Bank relationship has been described as 'a burden of NAB's neck'.
The underperformance of Clydesdale has been blamed partly on the GFC as well as a "double-dip recession" that has hit the UK. (Recession - short lived recovery - recession)
Clydesdale Bank was involved in both payment protection and interest rate swap misspelling scandals, which are seen ethical/CSR issues.
This attempt to offload an underperforming asset coincides with NAB's new strategy to focus on their domestic markets in Australia and New Zealand.
Would we have made the same decisions?
Purchase of Clydesdale Bank
Purchase of GWB
Similar to the Australian banking sector, the British banking sector is rather principle based.
The American banking sector on the other hand, is more rule based.
This makes an internationalisation strategy into the UK market more logical.
It was a good strategic decision to divest from both the British banking market and the American banking market.
This opinion is based on the under performance of ventures into both markets and also fits with the company's new strategic decisions to focus on and re-establish its domestic market dominance.
Domestic competitors such as ANZ bank have internationalised into Asian markets, and given the GFC which struck particularly American markets, an investment into an Asian market such as China's would have been a stronger strategy.
Any internationalisation strategy carries some risk and an expansion into some Asian markets involves political and cultural restrictions such as;
Lower restrictions on areas such as employee wellfare
Other Australian banks have been accused of investing in operations that support child labour, deforestation and illegal acquisition of land, so any re-internationalisation into Asian markets needs to be carefully planned and executed.
Being the 38th largest bank in the world (Accuity, 2015) it would be wise for NAB to re-internationalise in the future.
Invest in banking operations with similar principles around the globe as well as funding overseas projects to maintain customer trust and meet high CSR expectations.
This will ensure continued growth, which is not possible without expanding internationally as the Australian market is minute and limited compared with other markets.
Concentrating solely on Aus and NZ operations may result in NAB being left behind the other BIG 4 banks.
Re-internationalisation is a key in maintaining NAB's strong standing in both domestic and global markets.
NAB Determined to Outperform: Drummond
, viewed 18 August 2015 < http://news.nab.com.au/nab-determined-to-outperform-drummond/ >
Liondis, G. Financial Review,
NAB looks to divest in UK bank
, viewed 16 August 2015 < http://www.afr.com/business/banking-and-finance/financial-services/nab-looks-to-divest-uk-bank-20140122-iy7p8 >
NAB ties up Great Western Bancorp sale
, viewed 18 August 2015 < http://media.watoday.com.au/business/company-reports/nab-ties-up-great-western-bancorp-sale-6723064.html >
Stewart, R.M. Nasdaq,
NAB Sells Great Western Bank at Loss to Book Value
, viewed 16 August 2015, < http://www.nasdaq.com/article/nab-sells-great-western-bank-at-loss-to-book-value-20150728-01514 >
Yeates, C. The Sydney Morning Herald,
Why National Australian Bank's selling final stake in GWB
, viewed 14 August 2015, < http://www.smh.com.au/business/banking-and-finance/why-national-australia-banks-selling-final-stake-in-great-western-bank-20150717-giedue.html >
Pash, C. Business Insider,
NAB is selling it's last stake in US-based GWB
, viewed 14 August 2015 < http://www.businessinsider.com.au/nab-is-selling-its-last-stake-in-us-based-great-western-bank-2015-7 >
Annual Financial Report 2014
, viewed 18 August 2015, < https://www.nab.com.au/content/dam/nab/about-us/shareholder-centre/annual-reports/pdf-reports/2014-annual-financial-report.pdf >
Eyers, J. Australian Financial Review,
NAB's Andrew Thorburn gets to grips with his to-do list
, viewed 16 August 2015, < http://www.afr.com/brand/boss/national-australia-banks-andrew-thorburn-gets-to-grips-with-his-todo-list-20150521-gh6goc >
Welch, L. & Luostarinen, R.,
Internationalisation: Evolution of a concept,
Pg 83, viewed 12 August 2015
Welch, L. & Welch, S.,
International Business Review 18
(2009), viewed 12 August 2015