NAB interim chief executive Philip Chronican

The theme of accountability was a prominent element of NAB’s 2019 half-year result, released today, with interim chief executive Philip Chronican vowing to “confront broader issues of how we treat customers, and the accountability, governance and culture inside the bank”.

The Hayne royal commission was front of mind as Chronican said winning trust was the first thing on the agenda. A massive remediation bill for the period was the monetary starting point, followed by a focus on “fixing the issues that caused out failures so they don’t happen again”.

“We have around 350 people dedicated to remediating customers and will soon have 500 as we bring greater focus and discipline to resolving issues,” Chronican outlined in a statement on Thursday. “In 1H19 we have taken an additional $525 million (post tax) in charges in connection with increased provisions for customer-related remediation.”

“The total remediation to customers, as it stands at March, is $1.1 billion,” Chronican revealed on an investor call this morning. “Obviously it’s in our interests and our customers interests to get that in their hands as soon as possible.”

By comparison, ANZ yesterday announced a $123 million (post tax) remediation bill for the same period, with a $657 million (post tax) remediation bill since 2017.

Part of NAB’s plan is the divestiture of its MLC wealth division, which the bank confirmed is on hiatus until at least the second half of the calendar year.

The bank announced a $20.6 million loss in the consumer banking and wealth division for the period, which chief financial officer Gary Lennon partly attributed to “a continuous shift towards lower margin product”. A commitment to abandon grandfathered commissions is unlikely to improve this position for new MLC head Geoff Lloyd.

Lennon remained upbeat about the MLC split, saying that “the work required to divest is progressing well”, and that Lloyd and his team had completed a full review and found that “opportunities exist to simplify, modernise and then grow the business”.

Prudent decision

As part of the bank’s 2019 half-year results the NAB board determined it was “prudent” to reduce the 2019 interim dividend to 83 cents, ostensibly to strengthen the bank’s coffers in the eyes of the Australian Prudential Banking Regulator.

Aside from the looming constraints of APRA’s ‘Unquestionably Strong Capital’ requirements from 2020, Chronican acknowledged on an investor call this morning that “a more difficult operating environment”, lending losses and the large remediation bill had impacted the bank.

NAB’s revenue for the 6-months remained broadly flat at $8.8 billion, with a statutory profit line of just under $2.7 billion.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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