NAB to suffer setback of $1.2b

NATIONAL Australia Bank will cop a $1.18 billion hit in its full-year results, including an extra $832 million to repay customers wronged by the fees-for-no-service advice scandal and dodgy insurance.

The big four lender said the provisions, which also include $348 million related to software accounting changes, are set to reduce its second-half cash earnings by an estimated $1.12 billion after tax, adding to profitability pressures from ongoing interest rate cuts.

NAB’S royal commission remediation bill now stands at $2.09 billion after it was dragged over the coals at the damaging Hayne inquiry.

The bank said that more than 90 per cent of the charges unveiled yesterday relate to wealth and insurance matters, including fees charged by NAB advice partnerships, consumer credit insurance sales identified by an ASIC review, noncompliant advice provided to wealth customers, and adviser service fees charged by NAB Financial Planning.

The bank had previously said additional customer-related provisions were expected in 2H19, but NAB interim chief executive Philip Chronican said yesterday the size of the provisions were significant.

“We understand that shareholders will be rightly disappointed,” he said.

“However, we also recognise the need to prioritise dealing with these past issues and fixing them for customers.”

NAB said changes to software capitalisation balances, necessitated by a review, were expected to deliver a $348 million hit to 2H19 cash earnings.

Shares in the bank fell as much as 3.4 per cent to a threeweek low of $28.70.

The provisions come two months before Mr Chronican hands over the chief executive role to Ross Mcewan on a permanent basis.

Mr Chronican will become chairman as part of the shuffle, replacing Ken Henry, who was singled out for his role in the bank’s reputational implosion.

NAB in May slashed its dividend to its lowest in almost nine years after its provisions for customer remediation – related to the sort of conduct uncovered at the royal commission – hit $1.1 billion.

NAB is not alone in paying the price for mistreating customers. The cost of the royal commission clean-up bill hit $2.1 billion for the Commonwealth Bank after it booked $1.2 billion in extra costs at its full-year results in August, including $918 million in customer remediation expenses.

ANZ had announced $928 million in pre-tax provisions over the past two years, while Westpac had made $1.45 billion in pre-tax provisions over the past three, including $1.25 billion for refunds.

AMP confirmed in August that it was on track to complete its $778 million customer remediation program in 2021, while IOOF set aside $235 million to cover the cost of customer refunds.