NAB to take $314m hit on compo charges
National Australia Bank will take a $314 million hit for customer compensation costs stemming from misconduct in its wealth management arm, which has been exposed at the royal commission.
NAB on Tuesday became the final big four bank to detail the hit to its profits from scandals being scrutinised by the Hayne royal commission into misconduct in finance.
Its full-year results will include $314 million in extra costs due mainly to customer remediation, including refunds for customers who were charged for financial advice they did not receive - an issue that is also being pursued by the corporate watchdog in court.
NAB said the extra costs, which will take out $261 million from its after-tax profit for the second half, also related to a review of customer files for inappropriate financial advice, and other "regulatory compliance matters".
“Where we have let customers down, we are determined to put things right. We have made good progress in resolving a number of issues that impacted our customers and we want to compensate them as quickly as possible,” NAB's chief executive, Andrew Thorburn, said.
Mr Thorburn will appear before the federal government's banking inquiry in Canberra this Friday, where he will likely face questions over the misconduct exposed at the royal commission.
NAB had previously told the market in August that it would be making extra provisions for compliance expenses, which have dragged on profits across the major banks this year.
NAB said the costs did not include its costs from responding to the royal commission, which are expected to be in the tens of millions of dollars.
Commonwealth Bank's full-year profit result in August was 5 per cent lower, in a result marred by compliance costs including a record-breaking fine for its money laundering compliance scandal.
Westpac has flagged a $235 million reduction in full-year cash profit, while ANZ this month indicated it was setting aside $421 million for customers who received dodgy financial advice.
Aside from the compensation costs and lawyers' bills, banks also face weaker credit growth, which analysts believe may slow further as a result of the royal commission's scrutiny and pressure on banks to tighten their lending standards.
The experience of banks overseas following scandals has also been that compensation programs can take several years to resolve. NAB signalled future costs from the wealth misconduct remained uncertain.
"These customer remediation programs are expected to continue into FY19, with potential for further costs, which remain uncertain at this point in time," NAB said.
In its market update, NAB said that the extra costs would not be excluded in its annual expense growth of 5 to 8 per cent.
The bank said it remained "well positioned" to meet the "unquestionably strong" capital benchmark set by the Australian Prudential Regulation Authority by January 2020.
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