National Australia Bank underestimated the process of separating its wealth business from the bank, NAB’s acting CEO Phil Chronican told a parliamentary hearing on Friday.
Chronican said the original plan to spin off the wealth business this calendar year was “simply not possible” during a series of questions in front of the House of Representatives Standing Economic Committee. He pointed to the ongoing remediation process and the financial sustainability of the wealth operations as reasons for the continuing delay.
MPs posing questions to Chronican pushed the interim CEO on whether it’s reasonable for policy makers to be disappointed the wealth divestment has not happened as it was supposed to, given the wrongdoing perpetrated by vertically integrated institutions and highlighted in the Hayne royal commission.
“I think scandals still happened within non-vertically integrated businesses as well,” Chronican replied. He then continued that not successfully separating the business would not just be disappointing to outsiders but also disappointing to the institution’s management and board.
When NAB first announced it planned to spin off its wealth business following the royal commission, it’s timeline projected completion this calendar year (2019); former Perpetual CEO Geoff Lloyd was subsequently appointed CEO of the NAB’s wealth business at the end of 2018.
In February this year the bank announced it would put on hold the public markets exit plan of MLC Wealth until at least the second half of this calendar year. On NAB’s earnings call last week Chronican said the business would target a public markets exit in FY20. NAB’s financial year ends in September.
In the parliamentary hearing on Friday, Chronican told the committee its wealth exit timeline was 2021. A spokesperson for the company subsequently noted the bank continued to work towards an FY20 wealth exit timeframe.
Chronican pointed to the “several years” of financial and operational integration between the bank and wealth business that is taking longer than expected to be undone.
“Also the remediation sits under the wealth arm and the wealth business doesn’t have the resources on its own to cover the remediation,” he said.
Finally, he added the wealth business needs to be sustainable before the transition takes place.
“Some parts of this business remain in outflow,” Chronican highlighted, pointing to evidence the wealth business will not be sustainable on its own.
NAB is committed to setting MLC up for success following its spinoff, MLC’s Lloyd told Professional Planner in June.
“One of the things that attracted me to MLC was its plan to separate [the wealth business from the bank] for success,” he said.