Remediation leads to reduction on NAB cash earnings

National Australia Bank (NAB) has experienced a 10.8% reduction on their cash earnings to $5.1 billion for FY19.

In an announcement to the Australian Securities Exchange (ASX), the bank said the year had been very challenging as it required significant action for the bank to deal with past issues and make real changes aimed at earning trust with customers and the community.

NAB said its cash earnings reduction was a result of spending $1.1 billion after tax for customer-related remediation, and changes in its software capitalisation policy. The bank’s net profit from continuing operations was also down 14.4% to $5.1% but experienced a loss of $289 million when discontinued operations were included – a 25.5% reduction from FY18.

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NAB noted that it had also removed or reduced 185 fees across its banking and wealth arm. This sector of the business also had the largest reduction in cash earnings at 11.2% to $1.37 billion.

“Banking earnings decreased given lower margins with competitive pressures in housing a key driver, combined with increased credit impairment charges,” it said. “Wealth earnings also declined reflecting the impact of customer preferences and repricing on margins, and lower average funds under management and administration.”

The bank said it needed to make a sustainable change to “avoid mistakes of the past and get it right for customers every time”.

NAB interim group chief executive and chair-elect, Philip Chronican, said: “While underlying business performance for 2019 was solid, NAB has not achieved benchmarks on some financial and non-financial results. This takes into account the impact of substantial provisions for customer remediation”.

“We recognise the impact on our brand, reputation and the trust that our customers place in us… While we have made progress, it is not enough to be recognised in executive short-term variable reward in 2019.” He said.

On exiting MLC wealth, NAB said it was underway to creating a simpler, more customised advice business, a rebranding and leadership restructure in asset management, and more competitive pricing across the business.

National Australia Bank had also reinforced the likelihood of a float of MLC Wealth sometime next year.

In an analysis accompanying the bank’s full-year results, it said that it was continuing to make progress towards a separation of MLC Wealth, targeting a public markets exit in Financial Year 2020, together with the exploration of alternative transaction structures and options.

It said NAB would take a disciplined approach to the exit and would execute a transaction at the appropriate time having regard to the interests of all stakeholders.

“Any transaction remains subject to market conditions, regulatory and other approvals.”




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Much of the "remediation" spend by banks is actually a marketing spend. It is handouts to customers, designed to lift brand image. Banks are paying "fee for no service" refunds to customers who did actually receive service and were not in any way disadvantaged.

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