Troubled UK lender Clydesdale Bank will be split from its Australian parent National Australia Bank (NAB), and will be floated into a separate firm.
As per the plan, 70-80% shares of the Glasgow-based bank will be transferred to existing shareholders of NAB, and the remaining 20-30% will be offered to institutional investors.
The shares in the new entity, known as 'listco', will be listed on the London Stock Exchange and also traded on an Australian market.
NAB expects to complete the spin-off by the end of 2015.
"In relation to exiting our UK banking business, we have been examining a broad range of options including those provided by public markets," said NAB chief executive Andrew Thorburn.
"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."
NAB said it also plans to raise A$5.5bn (£2.88bn, €3.89bn, $4.38bn) through rights issue, with a view to bolster its balance sheet and to meet tougher regulatory requirements.
"The capital raising facilitates our proposed exit from the UK banking business and positions us ahead of anticipated regulatory changes," Thorburn said.
"While there is still much more to be done, we are clear about our priorities and are focused on what needs to be achieved."
NAB's exit from the UK comes after the bank was told by regulators to provide up to $3.2bn to cover costs from mis-sold financial products. In addition, Clydesdale was fined a record £20.7m in April for failing to handle mis-selling claims properly.