NAB's stark choice on MLC Wealth – float or flog it

28 April 2020

After reporting first-half earnings and revenue declines for MLC Wealth of 46.2% questions are being asked about whether National Australia Bank (NAB) can realistically expect to publicly float the business anytime this year with the likelihood being that the earliest it can go to market is late 2021.

Indeed, when itemising the banks immediate priorities to investors, the separation of MLC Wealth was listed under the heading “long term”.

When NAB released its first-half results to the Australian Securities Exchange (ASX) this week the underlying message around MLC Wealth was that it was “progressing towards separation via a public markets exit while exploring alternatives”.

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With the impact of the COVID-19 pandemic expected to be affecting markets well into the last quarter of the calendar year and MLC Wealth still dragging on NAB’s overall bottom line, the likelihood appears to be that “exploring alternatives” will be taking priority.

The manner in which MLC Wealth is viewed on the NAB balance sheet is reflected in the fact that the business reported a decline in cash earnings of $43 million or 50.6% driven by lower net operating income and higher expenses.

The report to the ASX said net operating income was down 9.2% or $39 million while operating expenses were up 5.8% or $18 million with the bank citing “increased costs associated with the MLC Wealth separation and higher project spend on strategic and regulatory projects”.

Given those sorts of numbers, speculation of a deep economic recession and a long, slow climb to recovery the question is how long will the NAB board endure keeping MLC Wealth on its balance sheet?

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Did NAB do any due diligence on Geoff Lloyd? Did they take anything about the RC seriously?

He was the MD of Perpetual, they weren't mentioned at all in the RC? What's your point.

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