Shares in National Australia Bank have tumbled after Spanish giant Santander had denied it was interested in buying its troubled UK banks.
Investors had pushed NAB shares up on Monday after London’s Sunday Times reported that Santander was considering making a STG2 billion ($A3.04 billion) offer for the Yorkshire and Clydesdale banks.
But the share price dived after a Santander spokesman denied the report.
He told Dow Jones Newswires in London overnight that Santander was not in talks with NAB and, instead, was focused on organic growth for its British operations.
NAB shares fell 20 cents, or 0.74 per cent, shortly after the Australian market opened on Tuesday but, at 1118 AEDT, had recovered to be 10 cents, or 0.37 per cent, down at $26.75.
Clydesdale and Yorkshire banks made a loss of STG139 million ($A210.99 million) for the year to September, due to a weak British economy and poor-quality small business and real estate loans.
In April, NAB said it would cut 1,400 jobs as it restructured its UK business.
It also transferred Clydesdale’s real estate loans, worth STG6 billion ($A9.11 billion), to an NAB branch in London.
IG Markets analyst Stan Shamu on Tuesday said NAB shares had struggled after Santander’s denial.
“NAB has given back some of its gains it made after speculation that Santander was looking at some of its UK assets and that turned out to be untrue,” he said.
He said the market widely considered NAB’s UK banks to be a drain on its results and any news that it may be able to sell them would prompt a share price surge.
“Some analysts think it will unlock around $2 billion worth of value for NAB,” he said.
“It’s been an underperforming asset for some time and it’s really held back a lot of investors from investing in NAB.
“So, I think it’s widely considered a positive if they can unload these UK assets and move on.”
But, Mr Shamu said, if NAB was unable to offload Clydesdale and Yorkshire the market would have to focus on its local operations.
“The market would like to see them get rid of those UK assets. Other than that, it will focus on local factors and see how they perform here as opposed to their peers,” he said.
“But those UK assets will continue to be the elephant in the room for NAB.”