2nd UPDATE: National Australia Bank Says Comfortable With Status Quo In UK

National Australia Bank Ltd. (NAB) is comfortable with its position in the U.K. and doesn't feel under any pressure to participate in the consolidation in the banking sector there, a spokesman for NAB said Monday.

The spokesman was responding to a report in the U.K.'s Sunday Times that NAB is expected to put its U.K.-based banks--Clydesdale and Yorkshire--up for sale within weeks after it dropped out of the race for Royal Bank of Scotland Group Plc's (RBS) 318 U.K. branches. Without citing sources, the newspaper also said Spain's Banco Bilbao Vizcaya Argentaria SA (BBVA) is considering a takeover of NAB's British assets that could value the business at GBP2 billion.

"We wouldn't comment on the speculation but we would reiterate, as we've said before, that we are comfortable with the status quo and aren't under any pressure to participate in consolidation," the spokesman said.

The spokesman also declined to confirm NAB's withdrawal from the race for RBS' U.K. branches.

A person familiar with the matter told Dow Jones Newswires that NAB has dropped out of the running to buy the branches, leaving Spain's Banco Santander SA (STD) as the lead bidder. BBVA is still in the running for the RBS branches, although late last month RBS asked BBVA to come up with improvements to its original bid.

NAB pulled out of the process after market conditions made the bank less bullish on the bid, the person said.

An analyst from a major broking firm said NAB is likely to look at an exit strategy in the U.K., which "isn't an attractive market."

"I'm not sure that they'll get out of the U.K., though, at a time when valuations are fairly depressed," the analyst said.

Separately, NAB said its wholly-owned Great Western Bank unit has acquired assets and liabilities of TierOne Bank from the Federal Deposit Insurance Corp. for a cash payment of approximately US$76 million, subject to closing adjustments.

NAB said in a statement the acquisition includes all of TierOne's approximately US$1.9 billion in deposits and US$1.9 billion in loans under an agreement where the FDIC absorbs 80% of credit losses arising on the loan portfolio and related assets.

"This acquisition is aligned with our U.S. strategy and is a financially attractive bolt on opportunity," said Andrew Thorburn, NAB Group Executive Asia, New Zealand and the U.S.

"It increases Great Western's distribution and customer base in selected states that together have an agricultural output greater than Australia's," he said.

NAB announced in 2009 its intention to a acquire part of TierOne.

The loss share agreement has a term of 10 years for residential mortgages and five years for all other loans.

NAB said the acquisition will add to its earnings and that the Great Western loan portfolio remains more than 100% deposit funded following the deal, which is expected to require less than 10 basis points of NAB's tier 1 capital.

-By Rebecca Thurlow, Dow Jones Newswires; 61-2-8272-4679; rebecca.thurlow@dowjones.com

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