CLYDEDSALE Bank is expected to proceed with a stock market flotation today in spite of an embarrassing eleventh hour setback which an investment specialist said would weigh on sentiment towards the firm.

The flotation of the Glasgow-based lender was originally scheduled for yesterday, when National Australia Bank completed the demerger of Clydesdale and its sister Yorkshire Bank as CYBG. However, the group delayed finalising plans to sell 25 per cent of the shares in CYBG to institutions by 24 hours, until this morning, following an intervention by a credit rating agency.

The bank told investors: “CYBG has received a recent specific request from one of the rating agencies for certain financial information relating to its assessment of Clydesdale Bank's short- and/or long-term deposit rating. “

It added: “ The outcome of this assessment could be a near term downgrade of the short and/or long term deposit rating or the placing of such rating on credit watch with negative implications.”

The Australian bank stressed: “This ratings development may not occur, and should it occur, is not considered material to the financial position and outlook of CYBG.”

However, given the timing of the request for information, National Australia Bank and CYBG decided to delay finalising the flotation plans by 24 hours.

The flotation is due to follow an initial public offering of shares to institutions, which seems likely to value CYBG towards the bottom of the expected range, at around £1.6 billion.

David Duffy, chief executive of CYBG said yesterday he was delighted NAB had confirmed the demerger and that the IPO was expected to proceed.

He added: “Whilst we have a very short delay in launching the IPO it is very important that we commence trading as an independent company in the best possible way. We have made excellent progress with the transaction and we have very strong interest in our story."

NAB is expected to finalise the price of the CYBG share offering early this morning. Shares in CYBG are expected to start trading on the London Stock Exchange at 8am.

The Australian bank indicated it expected the IPO to be well received. However, it looks likely to accept a relatively low valuation for CYBG in order to ensure as many shares as possible are taken up.

“The Initial Public Offering is expected to proceed, with the IPO multiple times covered at 180 pence per CYBG share from international and Australian investors,” said NAB.

An offer at 180p would value CYBG at £1.6bn, only around 60 per cent of the £2.7bn book value the bank had at 30 September.

Announcing plans last month to sell 25 per cent of the business to institutions, NAB set a price range of 175p to 235p for shares in CYBG. This would have valued the business at around £1.5bn to £2bn.

The remaining 75 per cent of CYBG will be allotted to NAB shareholders.

Justin Urquhart Stewart of Seven Investment Management said the delay in completing the IPO may have dampened enthusiasm for CYBG shares among the kind of institutions targeted, which include pension funds.

He said: “It’s not encouraging anybody. The more questions you put in the minds of people the more concerns people have.”

Mr Urquhart Stewart underlined his belief that NAB was mistaken to plan to complete the IPO during a period of volatility on global stock markets, saying: “If I were the advisers I would be telling them to hold fire and to come back later when they could have got a fuller price.”

However, he believes CYBG could form an attractive takeover target for any firm interested in the UK banking sector. National Australia Bank has spent lots of time and effort readying CYBG for the demerger. The group has a good brand, albeit with a regional bias, and operates in a sector that is in much better shape than a few years ago.

NAB has made no secret of how keen it has been to offload Clydesdale, which it has described as a drag on growth.

But CYBG’s Mr Duffy believes the group has the potential to win market share from the UK’s high street giants.

Naeem Siddique, Investment Manager at stockbroking firm Redmayne-Bentley, said: “The float will value Clydesdale Yorkshire as the largest of the challenger banks and possibly pose the greatest threat to the incumbents.”

The Australian Financial Review reported that there was strong demand for the stock in the country at the bottom of the IPO pricing range.

CYBG shares are expected to be listed on the London Stock Exchange and the Australian Securities Exchange. Private investors will be able to buy shares from firms that subscribe to the IPO and those allotted them in the demerger.