NAB chief executive Ross McEwan boasted of the bank’s strong capital position after the sale of MLC Wealth on an FY20 presentation call this morning, telling media the $1.44 billion deal announced in August – along with several other measures – will ensure the bank “stays strong through the recovery and beyond”.
McEwan, who was appointed to lead National Australia Bank in July this year, outlined how the proceeds from the sale will consolidate the bank’s CET1 (Common Equity Tier 1) ratio by a significant margin when the deal is finalised, which is expected to happen mid-2021.
“The sale of MLC Wealth… will add a further 35 basis points to our CET1 capital at completion, taking our pro forma CET1 capital ratio to 11.82 per cent,” the CEO said.
After hovering under 10.5 for an extended period of time, NAB’s CET1 ratio has improved dramatically with a large capital raising exercise, which is estimated to add 98bps, and now the MLC sale. The influx of capital puts NAB safely above APRA’s preferred capital benchmark.
“As I said earlier in the year, I don’t want anyone concerned with the strength of the bank and these steps are ensuring we stay strong through the recovery and beyond,” McEwan stated.
In line with the strategy of other banking institutions that have recently offloaded their wealth arms, McEwan said the agreement to sell 100 per cent of MLC Wealth will enable NAB to “execute on our core banking business”.
The MLC sale was notable in that the buyer, IOOF Holdings, opted to leave the group’s Garvan, Apogee, Meritum and Godfrey Pembroke licensees behind. A lot remains on the line for IOOF, who need to convince MLC advisers to come over to the group instead of jumping ship to one of several acquisitive dealer groups looking to build scale.
‘Feeling pretty good’
The results call was relatively positive considering the anticipated effects of the pandemic and an ultra-low rate environment.
NAB’s profit fell 36.6 per cent but revenue still managed to go up two per cent in the second half of the year. Operating expenses increased almost five per cent but this can largely be attributed to extra staff and provisions for dealing with the pandemic.
Shareholders will receive 60 cents per share in FY20, according to the bank, with H2’s 30 cent dividend matching the H1 result.
“We’ve put the bank into a different shape,” McEwan said. “We’re actually feeling pretty good about this year.”
Chief financial officer Gary Lennon added that the bank’s customer remediation program is now “substantially complete”, with another $266 million paid out in H2 2020, bringing the total to $1.9 billion.
“The bulk are wealth related and part of discontinued operations,” Lennon said.
