Scandal-hit bank faces more costs

NATIONAL Australia Bank has warned it will likely have to set aside more cash to cover costs arising from the scandals that have engulfed the financial services industry.

In a statement yesterday, NAB chief Andrew Thorburn said the bank was expecting “to recognise additional provisions” in the second half of its financial year.

It emerged at the financial services hearing Royal Commission this week that NAB executives, in October 2016, had decided, without alerting the corporate regulator, to increase a pool of compensation for customers slugged for services they never received.

“The Royal Commission is challenging us with its focus on where we have let customers down,” Mr Thorburn said.

“We are determined to respond and become a better bank.”

His statement was issued with a trading update covering the group’s third quarter, the three months to June.

The bank revealed its net profit grew 3.1 per cent, compared with the same period a year earlier, to $1.65 billion.

Its cash profit, which is a closely watched industry measurement of underlying earnings, fell 3 per cent, also was $1.65 billion. Higher investment spending and credit impairment charges — broadly, costs for loans that have turned sour — weighed on the cash profit tally, the bank said.

Those impairment charges were $203 million for the quarter, spiking 9 per cent from the same period a year earlier.

Mr Thorburn said that, while the operating environment had been challenging, the group’s financial performance had been “sound”.

The bank noted the outcome of the “regulatory investigations” remained uncertain.