2nd UPDATE: NAB's UK Banks Approached As Sector Consolidates

National Australia Bank Ltd. (NAB.AU) said Thursday it may participate in the consolidation of the U.K. banking sector, where it owns the Clydesdale and Yorkshire banks, following several informal approaches.

"We have been approached by a number of players in the U.K. market to see how we could work with them to participate in that consolidation," the bank's chief executive, Cameron Clyne, told shareholders at the group's annual general meeting in Brisbane.

He said the group would "explore and assess what value these approaches offer for NAB shareholders" but declined to specify the nature of the approaches.

He said the group anticipated approaches were likely "because people are starting to look at the U.K. market as RBS and other assets come on."

"We've got a quality franchise and people are starting to make some informal approaches," he said.

Southern Cross Equities analyst T.S. Lim said the comments most likely point to takeover overtures for the Clydesdale and Yorkshire banks.

But Lim said that he does not expect NAB to sell the operations at this point in the cycle, and believes that despite NAB's stated focus on Australia, NAB would likely get a better price for its U.K. operations if it waits another two years or so.

Earlier this year, Clyne, who took over the top role at the start of 2009, said NAB would retain the two lenders despite speculation that it could offload them.

The news came as NAB unveiled an agreed deal to buy wealth management group AXA Asia Pacific Holdings Ltd. (AXA.AU), in a deal valuing the target at A$13.3 billion, as the bank continues to push its wealth management strategy in Australia and New Zealand. Under its plan, it would sell AXA Asia Pacific's Asian operations to AXA SA (AXA) and keep the Australian and New Zealand businesses.

The AXA Asia Pacific deal comes amid increasing signs that the Australian economy has escaped the global financial crisis relatively unscathed, although NAB Chairman Michael Chaney said that risks remain.

"The board is cautiously optimistic about the outlook for the Australian economy, with positive signs continuing to emerge, although the potential for further economic shocks cannot be dismissed at this stage," Chaney told shareholders.

The group also expects funding costs to remain an issue for the sector, Chaney said.

-By Lyndal McFarland, Dow Jones Newswires; 61-3-9292-2093; lyndal.mcfarland@dowjones.com

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