The National Australia Bank (NAB) is to pursue a demerger and IPO of its UK banking business.

The Group’s intention to exit the UK banking business was signalled in October 2014. It says that while remaining open to a trade sale, it intends to pursue a public market option of a demerger of approximately 70-80% of Clydesdale Bank’s holding company National Australia Group Europe Ltd and its subsidiaries (Listco) to NAB shareholders and a sale of the balance by way of IPO (approximately 20-30%) to institutional investors.

The demerger allows an exit to be targeted by the end of this calendar year, subject to market conditions.

NAB group chief executive officer Andrew Thorburn said: “A strong balance sheet has always been a priority at NAB which is why we are today announcing that we will be raising $5.5 billion of capital through a rights issue, as described below. The capital raising facilitates our proposed exit from the UK Banking business and positions us ahead of anticipated regulatory changes.

“While there is still much more to be done, we are clear about our priorities and are focused on what needs to be achieved. We are determined to deliver better outcomes for our shareholders, customers and employees.”