NAB’s compo pool $2b

NATIONAL Australia Bank’s bill to compensate customers overcharged, sold dud products or given bad advice has spiralled through $2 billion.

The bank announced yesterday that it would take a fresh hit of almost $1.7 billion at its full-year results, including a further $1.19 billion for customer “remediation”.

It means the pool of funds NAB has set aside to compensate customers now tips the scales at $2.09 billion.

Customers levied excessive fees — or fees for services they never received — by financial advisers are among those receiving refunds.

Others being compensated include customers given unsuitable financial advice and those sold insurance of little value with products such as credit cards and home loans.

Shares in the bank fell heavily on the revelations yesterday, sliding 3.4 per cent in early trade — a fall that cut almost $2.9 billion from the group’s market value.

They recovered ground in later trade, ending the session 2.3 per cent lower at $29.02.

NAB acting chief executive Philip Chronican said the bank was “moving forward with rigour and discipline to make things right for customers”.

“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.”

The bank had made 450,000 remediation payments to customers between June last year and August this year, Mr Chronican said. The payments totalled $202 million.

NAB said yesterday that it was also taking a hit related to a change in how it accounts for the value of software.

Coupled with the customer compensation bill, it means the bank will take a hit of $1.68 billion — or $1.18 billion after tax — at its full-year results.

The bank, which operates to a financial year ending in September, is due to report its results early next month.

It said the charges announced yesterday would strip $1.18 billion from its net profit.

In the 18 months since April last year, NAB will have taken a profit hit of $2 billion from customer compensation costs and software accounting changes.

The latest hit will help reset the bank’s profit and loss statement ahead of the arrival in two months of incoming chief executive Ross McEwan.

Mr McEwan accepted the role in July. Former chief executive Andrew Thorburn quit in February.