NBNK Invest Starts Trading As It Eyes UK Bank Assets

By Patricia Kowsmann Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--A new vehicle set up by two London financial-sector heavyweights to buy U.K. banking assets has raised GBP50 million from an initial public offering, marking yet another new entrant in the country's changing bank sector.

NBNK Investments PLC (NBNK.LN) issued 50 million shares at 100 pence a share, and is now trading on London's AIM, the company said Friday. The shares were around 105 pence in early trading.

Peter Levene, chairman of Lloyd's of London, the insurance market, will be chairman of the company while City guru David Walker, who recently led a corporate governance review of the banking sector, will hold a non-executive role.

Levene and Walker weren't available for comment Friday.

In a statement, Levene said NBNK "will now establish a dialogue with a number of sellers of assets which would fit our acquisition profile."

NBNK said it will initially focus on the retail banking and small-and-medium enterprise sectors. Over time, it intends to expand into retail wealth management, it added.

The two assets the new group is initially eyeing are 600 branches Lloyds Banking Group PLC (LYG) is putting up for sale in coming years, and 75 branches from nationalized bank Northern Rock. Combined, they represent a 7% market share of the U.K. retail banking market.

NBNK is expected, however, to face fierce competition from other new entrants, including Richard Branson's Virgin Money, U.S. entrepreneur Vernon Hill's Metro Bank PLC and retailers like Tesco PLC (TSCO.LN).

The U.K. banking sector is restructuring after its near collapse during the financial crisis, which forced two of the country's largest banks to seek government help.

Lloyds is now 41%-state owned, while Royal Bank of Scotland Group PLC (RBS) is 83%-state owned.

The two banks have been forced to sell assets by the European Union following their state bailouts. Lloyds has until 2013 to sell the 600 branches. The sale process hasn't begun.

Once it does, NBNK is expected to do a secondary fund raising and list on the larger London Stock Exchange.

In the filing, NBNK Investments said it wants to establish a network of 400 to 600 branches across the U.K., which would operate under a traditional service-based banking model.

The company won't operate in wholesale, international or investment banking, it added.

Its listing comes a few weeks after another new entrant, Metro Bank, opened the doors of its first London branch. Like NBNK, Metro bank has also advocated back-to-basics banking, offering services including long opening hours, speedy account set-ups, and water bowls and biscuits for dogs that customers bring into branches.

Analysts, however, said new entrants will face tough competition from established heavyweights, including RBS, Lloyds and HSBC Holdings PLC (HBC), which are better equipped to deal with regulatory changes and funding hurdles.

NBNK has received the backing of well-known investors, who are expected to help the company raise more capital for acquisitions.

Invesco Asset Management owns 29.5% of the vehicle's shares, followed by Aviva Investors, with 11.5%. BlackRock Investment Managers and JP Morgan Asset Management are also shareholders, owning a combined 13% of the stock.

Hedge funds Moore Europe Capital Management LLP and Och-Ziff Capital Management hold 9.4% of the vehicle each.