NAB scandal cost fallout slaps results
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.
Mr Thorburn’s 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 clocking in at $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 clocked in at $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”.
“As we make progress towards resolving several previously disclosed regulatory compliance investigations, we expect to recognise additional provisions in the (second half) result, noting there are significant uncertainties in determining a provisioning outcome at this time,” Mr Thorburn said.
“The royal commission (into misconduct in Australia’s financial services sector) is challenging us with its focus on where we have let customers down. We are determined to respond and become a better bank through living our purpose and values every day.”
The bank noted the outcome of the “regulatory investigations” remained uncertain.
It emerged at the royal commission on Monday that NAB executives, in October 2016, had decided – without alerting the corporate regulator – to increase a pool of compensation for customers who were slugged for services they never received.
The bank failed to tell the Australian Securities and Investments Commission about the increase despite the fact it was aware the watchdog was poised to publish a report on the scale of the fees-for-noservice scandal across the banking industry.
Excluding any extra provisions, NAB’s expenses were forecast to rise 5 per cent to 8 per cent over the year to September, Mr Thorburn said.
NAB said its net interest margin – broadly its profit margin on loans – declined “slightly” during the past quarter, reflecting higher shortterm wholesale funding costs and intense competition in the home loan market.
Mr Thorburn said the bank had made “further progress on our transformation (program) by investing in both productivity and growth initiatives”.
NAB shares climbed 1.5 per cent, or 42c, yesterday to end the session at $28.36.
editorial@cairnspost.com.au facebook.com/TheCairnsPost www.cairnspost.com.au twitter.com/TheCairnsPost