Clydesdale Bank, which includes Yorkshire Bank, will see 70% to 80% of its shares transferred to NAB shareholders, while the remainding shares will be listed on both the LSE and on the Australian market.
National Australia Bank is hoping to raise A$5.5bn in capital before the end of the year.
NAB’s intention to exit the UK Banking business was first signalled in October 2014 following a fall of nearly 10% in full-year profits, largely due to provisions relating to a misconduct over insurance policies.
Yorkshire and Clydesdale, which have 2.7million customers and 330 branches, have also taken a big hit on PPI and swaps mis-selling, forcing it to put aside more than £1.2bn in compensation.
Last month, the Financial Conduct Authority fined Clydesdale Bank an additional £20,678,300 for "serious failings in its Payment Protection Insurance complaint handling processes" between May 2011 and July 2013 - the largest ever fine imposed by the FCA for failings relating to PPI.
NAB's half year results stated that "the UK Banking business is now in a position to be demerged to shareholders and listed as a standalone retail and business bank with a strong franchise across its core regional UK markets, a strong balance sheet and capital position, a robust business plan and an experienced management team".
NAB chief executive Andrew Thorburn said:
“In relation to exiting our UK banking business, we have been examining a broad range of options including those provided by public markets.
“It is a priority to exit this business, and we are today announcing our intention to pursue a demerger and initial public offering of the UK banking business.”
According to BBC News, Debbie Crosbie, acting chief executive of Clydesdale, said the demerger announcement "marks the beginning of an exciting new opportunity for Clydesdale and Yorkshire Banks".
She said:
"Our performance is improving and we're providing real customer choice in the UK, which is driving encouraging growth across our target retail and SME markets.
"We believe the foundations of a strong standalone future have been laid in the progress made restructuring and refocusing our business, and this is clear in our half-year results."
