Clydesdale Bank shares make waves on Day One

After a brief scare, Clydesdale Bank, or CYBG as it will be known in the City, finally listed in London Wednesday, a day after completing its demerger from National Australia Bank (NAB). And, despite another down day for the stockmarket, pricing its shares at the bottom end of the range has ignited buying interest.

Clydesdale priced its IPO at 175p-235p per share last month, and on Monday received approval to get going from the Australian courts. Proceedings should have got underway yesterday, but one of the credit ratings agencies asked for more financial information to assess Clydesdale's deposit rating.

But after getting the green flag, Clydesdale floated at 180p, valuing the business at just under £1.6 billion. At one stage, NAB was said to have wanted £2.6 billion for the owner of Yorkshire Bank. Still, by lunchtime Wednesday, shares in the high street lender had risen by 6% to 190.75p.

It is very early days, but it should put a smile on the face of George Osborne. Last week the chancellor delayed plans for a retail offer for the government's final stake in Lloyds, blaming market volatility.

Banks remain under pressure, as low interest rates tend to work against them, but there is clearly an appetite for bank equity at the right price, even when the sector is on its knees. At the same time Clydesdale began trading Wednesday, the FTSE 350 bank index slumped to its lowest since November 2011, down 73% from its pre-Credit Crunch high.

This is certainly a brave move by NAB to float Glasgow-based Clydesdale, a company with an image problem after mis-selling payment protection insurance (PPI). It's racked up over £1.5 billion in conduct costs since March 2013 and £21 million in fines for poor handling of PPI complaints.

However, Clydesdale had an overhaul ahead of the IPO. Its capital equity tier 1 ratio (CET1) - a measure of financial strength - has reached 13.2% versus 9.4% a year earlier. Its loan book has also been reshaped to have a greater contribution from mortgages and its asset portfolio has been de-risked.

To improve returns, a new management team will drive the focus back to its core retail business and small and medium-sized businesses. In just over 12 months there have been 11 new additions to the management team, including lifelong banker David Bennett as deputy chairman, ex-Allied Irish Banks boss David Duffy as CEO, and Ian Smith as Deloitte man finance chief.

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