Clydesdale Bank could unveil plans this week for a big dividend increase after the Bank of England places the lender on a less onerous capital reserves regime.
The Glasgow-based bank is to meet investors in London on Tuesday where it is set to reveal it will have an extra £1bn to spend.
The windfall is due to an expected agreement with the Bank to treat it in the same way as larger lenders such as RBS, which are allowed to keep a thinner cash cushion than smaller rivals.
Andrew Bailey, former head of the Bank of England’s Prudential arm, said early this year that the Bank was working on a range of solutions to help challenger banks compete with there larger rivals.
“It’s certainly an issue [ higher capital requirements for small lenders], no doubt about that ... it comes back to how banks think about the cost of individual lending,” he said.
David Duffy, Clydesdale chief executive, has been in talks with the Bank over the potential change since the lender floated in February.
One investor said Duffy could use the freed-up cash to buy rivals. The lender, which was spun out of National Australia Bank (NAB), is seen as a possible suitor for the Co-op Bank and Royal Bank of Scotland’s Williams & Glyn operation.
Duffy, a turnaround veteran and former boss of bailed-out Irish lender Allied Irish Banks, is also likely to update shareholders on the progress of his five-year turnaround plan.
By 2020, Clydesdale plans to grow its retail loan book by 50% and ramp up small business lending by a quarter.
Despite gliding through the financial crisis, its future has been repeatedly cast into doubt. NAB, its former owner since 1987, had made no secret of its desire to sell. Clydesdale, with Yorkshire as its second-biggest brand, is still struggling with the cost of writing off bad loans and paying compensation to customers who were mis-sold payment protection products.
Clydesdale, one of only 10 commercial banks in the world authorised to print and issue banknotes, is seeking to grow outside its northern heartland. The impact of the Bank of England’s recent interest rate cut is expected to be discussed and could hinder Duffy’s plans.
The lender, founded in 1838, is one of three large Scottish banks alongside Royal Bank of Scotland and Bank of Scotland. It provides retail, commercial and private bank services to nearly 3m customers spread across Britain through 320 branches.
