NAB to pay another $478m in wealth-related remediation

In a trading update this morning, NAB said the additional expense is expected to reduce 1H19 cash earnings by an estimated $325 million and earnings from discontinued operations by an estimated $200 million.

“We are putting things right where we have treated our customers poorly and making sure that they are compensated more quickly. Since June 2018, we have made approximately 360,000 payments to customers with a total value of approximately $145 million,” NAB chief executive Philip Chronican said.

“There are currently around 350 people dedicated to remediating customers and we will soon have around 500 across NAB as we bring greater focus and discipline to resolving issues and making sure they do not happen again.”

Of the 1H19 charges, about 91 per cent, or $478 million, are for wealth related matters, with the remainder for banking.

In combination with provisions raised in 2H18, which have not yet been utilised, this brings total provisions for customer-related remediation at 31 March 2019 to $1,102 million.

The key items giving rise to increased costs for customer-related remediation include:

• Consumer credit insurance sales through certain NAB channels. This relates to a previously disclosed remediation program that arose from an ASIC industry-wide review. Provisions have been increased as progression of the program has now allowed remediation estimates to be determined with a greater degree of reliability;
• Non-compliant advice provided to wealth customers that is being addressed as part of NAB’s ongoing wealth advice review;
• Adviser service fees charged by NAB Financial Planning (salaried advisers). Provisions have been increased to reflect a higher assumed refund rate of 23 per cent (or about 31 per cent including interest costs);
• Adviser service fees charged by NAB advice partnerships (self-employed advisers). Provisions have been increased to cover the expected costs to undertake the review and the approach to remediation, but at this stage exclude any allowance for customer refunds, which are still to be determined; and
• Banking related matters including provisions for incorrectly charged fees on certain fee exempt transactions.