Tag: NAB

NAB In Trading Halt

The securities of National Australia Bank Limited will be placed in Trading Halt Session State at the request of the Company, pending the release of an announcement by the Company.

The securities will remain in Trading Halt Session State until the commencement of normal trading on Thursday, 29 October 2015.

It will most likely be the sale of a non-core business, releasing capital, as part of NAB’s balance sheet build. Speculation is that it may related to the potential sale of NAB’s life insurance business.

NAB changes debt collection practices following concerns by ASIC

According to ASIC, National Australia Bank (NAB) has made changes to its debt collection practices following ASIC concerns that some of NAB’s collection letters may have been misleading, deceptive or unconscionable.

ASIC was concerned that NAB was sending debt collection letters to customers using letterheads for “Fairhalsen Collections” and “Brunswick Collections Services”, which may have given the incorrect impression that NAB had sold, outsourced or otherwise escalated a debt when this was not the case. These letters only disclosed that the entity was a division of NAB in fine print at the bottom of the page.

ASIC was also concerned that letters sent to some customers during the collection process stated that if the debt was not paid, or contact made:

  • legal proceedings for recovery of the entire debt might commence without further notice and that such proceedings could result in a judgment being entered and/ or bankruptcy;
  • a debt collector might visit the customer’s  home to collect the debt; or
  • NAB might use any other legal action necessary to collect the debt.

In fact, for the majority of recipients, such action was either unlikely or would only be considered at a later stage in the collection process.

In response to ASIC’s concerns NAB has removed from its collection letters:

  • references to Fairhalsen Collections and Brunswick Collection Services
  • representations in relation to face-to-face contact, legal action and bankruptcy (unless such action is likely to occur).

ASIC Deputy Chairman Peter Kell said, ‘Creditors and collectors are entitled to accurately explain the consequences of non-payment of a debt, but the consequences must not be misrepresented or overstated. The threat of legal proceedings and bankruptcy can be very stressful. Collectors must not threaten legal action if such action is not possible, not intended, or not under consideration.’

NAB Joins The Mortgage Rate Uplift Parade

Following WBC and CBA, NAB has announced a rate hike today. Effective 12 November, rates on mortgages will rise 17 basis points, so NAB’s standard variable rate will be 5.60%.

Today’s announcement responds to market conditions, as well as regulatory changes that require NAB to increase the amount of capital applied to residential mortgages.

NAB Group Executive for Personal Banking Gavin Slater said the NAB had carefully considered the decision to raise interest rates.

“There are a range of factors that come into consideration in interest rate decisions. The home loan market is dynamic, with multiple changes being seen across the industry,” Mr Slater said.

“Regulatory changes on capital requirements also increase the costs associated with providing home loans. In May this year, NAB took early steps to strengthen our capital position by raising $5.5 billion to begin to address expected changes in capital requirements.

“Today’s decision has not been easy, but we believe this is right decision for the long term. We know we have to balance the interests of our customers with the needs of our more than 550,000 shareholders.

“Interest rates are at historically low levels and NAB remains committed to providing a competitive proposition for our customers.

“We appreciate that price is important, but we also know that customers want us to provide the right help and advice, the right products, and deliver innovative digital capability.”

Same rationale, capital requirements.  Fixed rate home loans and business rates remain unchanged.

Who’s next?

National Australia Bank to implement a large scale Financial Advice Remediation program

ASIC has announced that from today, National Australia Bank (NAB) will be contacting customers who may have received non-compliant advice since 2009. Affected clients will have their files reviewed to determine if compensation should be paid. NAB will also provide affected customers with financial assistance to seek professional independent advice where appropriate.

ASIC has worked with NAB to develop their Financial Advice Customer Response Initiative (CRI), a large review and remediation program for customers affected by non-compliant advice. ASIC will ensure that the CRI will provide a fair and effective mechanism for customers to be properly compensated (REF: MR15-101). The CRI will also be subject to independent scrutiny by an external consultant, which will report its findings to ASIC. ASIC acknowledged NAB’s co-operation in this matter. This action is associated with ASIC’s broader Wealth Management Project (refer MR15-081).

Background

The Wealth Management Project was established in October 2014 with the objective of lifting standards by major financial advice providers The Wealth Management Project focuses on the conduct of the largest financial advice firms (NAB, Westpac, CBA, ANZ and AMP). ASIC’s work in the Wealth Management Project covers a number of areas including; (i) ASIC’s work with other the Wealth Management participants to address the identification and remediation of non- compliant advice.  This is in addition to the work ASIC is doing to ensure appropriate customer remediation where fees have been charged and no advice service has been provided; ii) Seeking regulatory outcomes where appropriate against Licensee’s and advisers. For example, since ASIC’s Wealth Management Project commenced ASIC has banned the following advisers from the financial services industry:

Nab Offers Mortgage Via Brokers Frequent Flyer Point Incentive

In a sign of the highly competitive nature of home loans, NAB has announced a major frequent flyer offer for broker-introduced clients targetting owner occupied loans. Broker customers can apply between 21 September and 31 December 2015 for 250,000 NAB Velocity Frequent Flyer Points as an alternative to a $1500 cash back offer, provide they switch their main banking to NAB.

In the latest edition of the Property Imperative, released today we highlighted the intense focus on owner occupied loans as opposed to investment loans, and the various discounts and incentives on offer. The mortgage wars just stepped up another gear!

NAB to offer “Robo-Advice”

According to Money Management,

NAB has become the first of the ‘big four’ banks to announce a digital advice offering, stating that 40,000 selected customers would be given free access to the service via the bank’s internet banking service, with an expectation of providing the service to its 3 million customers in due course.​

The service, named NAB Prosper, has been labelled as digital advice with the bank distinguishing it from robo-advice by stating the advice would be personalised and tailored to its customers via a range of specific questions relating to their current financial situation and future goals.

The service would also be distinguished from robo-advice in that it would not provide transaction services nor would it direct people to purchase any product.

Rather the service would provide an up to date view of a customer’s financial position and provide a range of broad advice options based around risk profiling and financial modelling with customers directed to personalised advice if they require it.

The initial phase of the service will provide advice on super and insurance and will be available from early October and will eventually expand to cover debt, cash flow, investments and estate planning in 2016.

NAB executive general manager – wealth advice, Greg Miller, said NAB Prosper was designed to provide advice to the 80 per cent of people who did not have an ongoing relationship with a financial adviser and would complement the face to face advice process.

“The personal relationship between a consumer and an adviser is crucial, and we know this relationship will continue to be a fundamental part of the advice process,” he said.

“Allowing people to see their current financial situation has the ability to trigger a conversation with an adviser. With only one in five Australians currently seeking financial advice, this can only be a good thing for customers and the industry more broadly.

“Advisers benefit from this by being able to capitalise on changing customer segments and deliver targeted, relevant advice, simply and efficiently. It supports growth, strengthens capabilities and will improve efficiencies across our network.”

Miller said the move to provide digital advice was driven by changing consumer needs and behaviours and the advice sector was not immune but would continue to play a role dealing with major and important events and decisions for clients.

“The shape of the advice industry is changing and it will be largely driven by consumers, whose needs are evolving. Different consumers want to access financial advice in different ways, and we need to adapt our offering so consumers can choose when, where and how they deal with us,” he said.

“We’re continuing to look at ways to evolve our business to meet these changing needs. This evolution will continue to include advisers for those life-stage events where a customer wants to sit down and have a face-to-face discussion with their adviser.”

NAB Ups Value of Investment Loans Held

NAB has announced a reclassification of household data provided previously as part of its regulatory reporting obligations. The reclassification, similar to the recent ANZ announcement, has no impact on customers and does not alter risk weighted assets, regulatory capital, cash earnings, balance sheet or risk appetite. The announcement was released to the ASX, not via the NAB web site or media releases.

The data being restated covers the period from July 2014 to June 2015. The main movements are:

  • Restatement of owner occupied housing from $165.4bn to 126.5bn
  • Restatement of investment housing from $66.6bn to $93bn
  • Restatement of non-housing from $11.5bn to $23.7bn

We have run an update to our APRA loan model which shows that the market for investment loans grew at a revised 11.16% (compared with the APRA 10% “speed limit”) and we estimate that NAB grew its investment portfolio by 13.79%, well above the hurdle.

NAB-Adjusted-Investment-LoansThese reporting adjustments make us question the accuracy of the reporting processes. We would observe that as a result of the banks adjustments the value of investment loans are higher, but the growth trajectory is similar to previously calculated, provided the one-off adjustments are run back through the full year.

 

 

 

 

NAB Q3 2015 Trading Update

In NAB’s Q3 2015 trading update they say that undiluted cash earnings were circa $1.75bn. 9% up on the prior corresponding quarter. Statuary profit was about $1.85bn. Within these results, revenue was up 4%, but stripping out one offs relating to UK CRE and asset sales, was about 2% higher. Net interest margin declined and expenses were higher by 4%. The B&DD charge fell 15% to $193m, thanks to lower provisions in the Australian bank (or more accurately, no repeat of one-offs made last time).  Over 90 days impairments were 0.78% across the group, down from 0.85%.

Common equity tier 1 (CET1) was 9.94%, a lift of 107 basis points from March 2015, mainly thanks to the rights issue.

In the Australian business, revenue rose on higher home lending and business lending, but offset by weaker Markets and Treasury income and and weaker business lending margins.

Issues remain about the costs of the UK exit. For example, a provision of £290-420m relating to payment protection liabilities, and £60-80m relating to interest rate hedging redress. They had flagged a £1.7bn estimate for the mitigation package and these more specific provisions will be an offset. However, there are still some unknowns.

NAB announces $50 million innovation fund

National Australia Bank (NAB) has announced that it will establish a $50 million fund to further accelerate the bank’s focus on customer-led innovation.

The NAB Ventures fund will enable NAB to access leading ideas and capabilities from around the world through entering into partnerships, alliances and making investments in innovative companies.

“This is an investment in our business designed to improve customer experience through innovative solutions, making banking easier, better and simpler,” NAB CEO Andrew Thorburn said.

“Banking globally is undergoing a digital transformation and NAB Ventures will ensure NAB is able to embrace these changes to deliver innovative solutions for our customers.”

It is envisaged the $50 million will be deployed over 3 years and will be invested both in Australia and overseas.

NAB Ventures will be part of NAB Labs, a dedicated innovation capability designed to build a culture of innovation and customer-led design within NAB, and position the bank to be agile and adaptive to rapidly changing digital advancements.

The fund will have two key objectives:

  • Deliver accelerated access to new capability, technology, intellectual property, and businesses that could be deployed into NAB and its customer offering; and
  • Enhance NAB’s insight into and connection with emerging business models and technology. Key areas of focus include mobile platforms, payments and data and analytics.

NAB has also introduced a Digital Acceleration Program to enable digital innovation to be developed and put in the hands of customers and bankers quickly.

“It’s critical that we are able to act quickly and be nimble in bringing digital innovation to market,” Mr Thorburn said.

NAB Labs has a dedicated team but also draws on people from across the bank and external partners – as well as extensive customer engagement – to design, experiment and develop new products and capability.

Mr Thorburn added: “We want our team to be among the best global thinkers in the innovation space and give our customers access to the best innovative thought – and we recognise that won’t all necessarily come from inside NAB.

“NAB Ventures will further enable us to access the best minds and cutting edge ideas.”

NAB Repricing Mortgage Strategy Has Different Tenor

NAB is the latest player to announce mortgage repricing changes, but with a focus in interest-only loans (whether owner-occupied or investment loans).

“National Australia Bank today announced it will increase variable interest rates on interest-only home loans and line of credit facilities by 29 basis points.

The changes are in response to industry concerns about the pace of investor growth, and NAB’s focus on delivering responsible lending practices into the Australian housing market.

Over the past three years, total housing loans have grown by 27 per cent across the industry.

During the same period, growth in housing investment loans and interest only loans has been 34 per cent and 44 per cent respectively. Interest only loans are the predominant structure for investors.

NAB Group Executive Personal Banking, Gavin Slater, said that the higher growth rates in investment and interest only loans had implications from a regulatory, industry and banking perspective.

In December last year, APRA announced a range of measures to reinforce sound lending practices across the industry. NAB has been working closely with the regulator to support these measures, including actions to restrict investor lending growth to no more than 10% p.a..

“In considering these and a range of other factors, NAB is confident the steps we are taking are the right approach to further support responsible lending practices,” Mr Slater said.

“In an environment of record low interest rates, NAB believes it is important to encourage our customers to pay down their home loan.”

NAB continually reviews its lending practices and remains committed to maintaining prudent lending standards and fulfilling its regulatory obligations.

For new loans, NAB’s interest only variable rate changes will be effective 10 August 2015.The change for existing interest only variable rate loans will be effective 10 September 2015. Additionally, changes to NAB’s fixed rate interest only loans will be effective 10 August 2015. Changes to NAB’s line of credit loans will be effective 10 September 2015.

Customers who want to know more about these changes and the impact on their circumstances are encouraged to talk to their banker about what works best for them”.

Our modelling suggests up to 35% of NAB mortgages may be impacted by these changes, creating a broader base of re-pricing than ANZ and CBA have announced. The quantum of the interest rise at 29 basis points is similar.  The net yield from this approach could well provide a higher return for NAB in terms of margins, unless owner-occupied interest-only borrowers decide to refinance to a competitor with a lower rate. Also NAB’s headline investor loan rate (not interest-only) will be more competitive than others, though of course headline rates are often discounted. We are noting some reduction in net average discounts on new loans being written across the industry.

In APRA’s recent reviews, they noted that some lenders were not adequately considering borrower repayment strategies on interest-only loans beyond the initial interest-only term. NAB’s repricing will reduce the relative attractiveness of interest-only loans.

Of note is the fact that Basel IV will likely lift the capital required for interest-only lending, so NAB’s move could be seen as preemptive positioning.