Australia's NAB flags extra $537 mln provision for customer refunds, talks dividend review
* New provision for refunds to hit earnings by A$325 mln
* Total customer-remediation provisions stand at A$1.2 bln
* Board to review dividend policy - analysts expect cut to
* Credit Suisse analysts say more refund charges to come
(Adds dividend cut estimate, more provisions to come, former
adviser sued by regulator)
By Paulina Duran
SYDNEY, April 18 (Reuters) - National Australia Bank Ltd
, the country's fourth-largest, on Thursday flagged an
additional A$749 million ($537.18 million) in charges to refund
thousands of wronged customers and said it would review its
Melbourne-based NAB said it has now put aside A$1.10 billion
to compensate customers as it speeds up efforts to regain public
trust after a damaging misconduct inquiry in the sector.
The inquiry has put banks and investment firms under
pressure to clean up processes that led to customers being
automatically billed for wealth management advice they did not
NAB was singled out by the inquiry for an apparent
unwillingness by its executives to accept responsibility for
past wrongs, which resulted in the resignation of its CEO and
NAB's extra provisions will result in a A$325 million hit to
cash earnings for the first half of this year, which the lender
is due to release on May. 2.
About 91 percent of the new provisions were related to its
wealth management division such as non-compliant financial
advice and incorrectly-charted fees, with the balance related to
The new charges included an assumption it would have to
refund 31 percent of service fees charged by employed advisers,
and the costs of reviewing service fees provided by its much
larger self-employed adviser network.
The provisions excluded, however, any customer refunds that
might be necessary to refund customers of self-employed
advisers, the bank said.
Credit Suisse analyst said that applying the same fee refund
rate meant the bank might have to account for another A$200
million to A$300 million in refunds.
The Australian Securities and Investments Commission (ASIC)
in March rebuked the banks for delays in fixing internal systems
that resulted in customers paying fees for services they had not
On Thursday, the regulator said a former NAB adviser had
been charged with criminal offences for "obtaining a financial
advantage by deception".
NAB's wealth management unit is already defending a civil
lawsuit launched by the regulator last year, accusing its
pension funds of charging fees with no service to hundreds of
thousands of retirees.
NAB also said that "as is the usual practice", its board
would review the bank's dividend settings, a comment analysts
believe increases the chances the lender could lower its
"We believe this statement supports our view that NAB's
dividend will be cut next month," Azib Khan, a banking analyst
at stockbroker Morgans said. Credit Suisse analysts said the
bank would likely lower its interim dividend by nine cents to 90
cents per share.
Under pressure from regulators and lawmakers, all the major
banks have increased material provisions related to efforts to
remediate customers for banking misconduct.
NAB shares were largely unchanged on Thursday morning
following the announcement, in line with the broader market.
"We are putting things right where we have treated our
customers poorly and making sure that they are compensated more
quickly," NAB's Chief Executive Officer, Philip Chronican said
in a statement.
Chronican said there were currently around 350 employees
dedicated to remediating customers, and that is expected to rise
to around 500.
($1 = 1.3943 Australian dollars)
(Reporting by Paulina Duran in Sydney. Additional reporting by
Nikhil Subba in Bengaluru. Editing by Michael Perry)
First Published: 2019-04-18 00:52:44
Updated 2019-04-18 08:49:36
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