National Australia Misconduct Costs Soar on A$1.2 Billion Charge
National Australia Bank Takes A$1.2 Billion Misconduct Charge
(Bloomberg) -- The cost of National Australia Bank Ltd.’s misconduct continues to mount, with the lender taking a further A$1.2 billion ($805 million) charge mostly to compensate customers given poor financial advice or sold junk insurance.
The charge, which will slice A$1.12 billion from second-half cash earnings after tax, and a warning there may be more pain to come, sent shares of the Melbourne-based bank down more than 3% in early trading.
“While we previously noted additional customer-related remediation provisions were expected, the size of these provisions is significant,” Acting Chief Executive Officer Philip Chronican said in a statement Wednesday. “We understand that shareholders will be rightly disappointed.”
The writedown shows the scale of the task facing incoming CEO Ross McEwan, who starts Dec. 2. McEwan, who engineered Royal Bank of Scotland Group Plc’s revival, replaces Andrew Thorburn, who quit in February after an inquiry into misconduct in Australia’s financial industry questioned whether he was capable of leading the lender’s response to a string of scandals.
As well as cleaning up the messes of the past, McEwan faces a challenging present with margins and earnings growth under strain and political pressure to pass on record-low interest rates to borrowers.
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Of the charges, A$832 million is to compensate customers primarily for fees paid to self-employed financial advisers who operated under National Australia’s license, or sold junk insurance on products such as credit cards. That takes total provisions for customer-related remediation to A$2.09 billion, the bank said.
The remaining A$348 million announced Wednesday relate to software write-offs.
National Australia isn’t alone among the nation’s lenders and wealth managers in forking out hundreds of millions of dollars in compensation after the misconduct inquiry heard customers were given poor financial advice, charged for services they never received, or pushed into high-risk products so advisers could hit bonus targets.
| To read more on banks’ bad behavior: |
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| Westpac Takes Further A$357 Million Customer-Compensation Charge |
| Commonwealth Bank Profit Falls on Compensation Bill, Margins |
| AMP Takes $214 Million Charge Over Advice Scandal; Shares Fall |
National Australia, which has a dedicated team of about 400 people working on remediating customers, signaled its compensation bill may rise.
“Until all customer payments have been completed, the final cost of such remediation matters remains uncertain,” the bank said.
It will release full-year earnings Nov. 7
To contact the reporter on this story: Emily Cadman in Sydney at ecadman2@bloomberg.net
To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Peter Vercoe, Katrina Nicholas
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