Tag: NAB

NAB to change remuneration arrangements for frontline bankers

NAB says it will change the remuneration structure for more than 4000 frontline staff nationwide from 1 October 2018.

Bankers who work in NAB’s branches and consumer call centres will be moved from their current incentives arrangements to NAB’s Group Short Term Incentive (STI) Plan. This change is in line with NAB’s commitment in April last year to implementing the recommended reforms of the Retail Banking Remuneration Review (Sedgwick Report).

NAB Executive General Manager of Performance and Reward, Lynda Dean, said these changes demonstrate NAB’s continued focus on its customers.

“We want our customers to be confident that, every time they deal with us, they are receiving a strong customer experience, and products and services that suit their individual needs,” Ms Dean said.

Under the NAB Group STI Plan, NAB employees are rewarded based on a balanced scorecard of customer advocacy, compliance with risk, process/quality improvements, and financial performance.

“We believe that how our people demonstrate NAB’s values as they do their job is just as important as the job itself – that’s why we’re moving all frontline bankers to the Group STI Plan.”

“This change is one of many things NAB is doing to make banking better for our customers, and to help bring to life our vision to be Australia and New Zealand’s most respected bank,” Ms Dean said.

This change means NAB’s reward structures are compliant with the reforms that independent expert Stephen Sedgwick AO recommended be introduced by 2020.

It follows a number of changes NAB has already made to its employee remuneration structure over the last 18 months, including:

  • In 2016, NAB moved away from performance-based, fixed pay increases for customer service and support staff. These staff receive a standard pay rise of 3 per cent per year, under the 2016 NAB Enterprise Agreement.
  • As part of the 2016 NAB Enterprise Agreement, product sales targets are no longer considered when determining pay increases for Group 3 and 4 employees, who include many branch managers and business bankers.
  • On 1 October 2017, NAB made changes to the remuneration structure for over 700 retail branch managers, assistant branch managers, and sales team leaders in consumer call centres – moving these employees from product-based incentives to the Group STI Plan.

“We have moved away from product-based rewards, to using a balanced scorecard approach for our staff – measuring and rewarding the ‘how’, not just the ‘what’,” Ms Dean said.

“Over the coming 12 months, we will continue to review our practices to ensure they align to delivering great customer outcomes.”

Introducing NAB Home Lending Specialists

NAB has also created a new role for bankers – NAB Home Lending Specialists – who will be specially trained to offer customers expert advice in home lending.

“We are investing in our people so that they have the capabilities, skills, and training to provide a simpler, faster, and better customer experience,” Ms Dean said.

NAB’s Home Lending Specialists will complete a Certificate IV in Financial Services, and undertake a tailored training program. Their remuneration structure from 1 October 2018 is also in line with the Sedgwick recommendations.

Synchronised global growth slowing, says NAB

From InvestorDaily.

The synchronised global economic growth that began in 2018 appears to be running its course, according to NAB.
‘Synchronised global growth’ was a favoured expression by economists and research houses at the end of last year, with each of the 45 major economies tracking upward growth.

“All the major engines of growth in the global economy are now synchronised in an upward trajectory for the first time since the end of the global financial crisis,” EY global IPO leader Martin Steinbach noted in late December.

But according to the latest economic summary note by NAB senior economist Gerard Burg, this global growth rate may have reached its peak.

“Global growth was marginally softer in Q1, driven by a modest slowdown in the advanced economies,” Mr Burg wrote.

Growth in the major economies was 2.2 per cent year-on-year in the first quarter of 2018, a small drop from the 2.4 per cent growth in the last quarter of 2017.

“Although this slowdown was modest, it points to a divergence in conditions across countries, which over recent years have displayed relatively synchronised growth.”

Source: NAB

Where growth in Italy, the UK and Japan had fallen in Q1, growth in the US had in contrast accelerated to nearly 3 per cent year-on-year, Mr Burg said.

“Early indicators of growth point to strong conditions in the second quarter, highlighting some upside potential to advanced economy growth in the short term.

“That said, as the impact of the fiscal stimulus from the large package of tax cuts at the start of this year fade, we expect growth to slow back towards potential as capacity constraints start to bite and monetary policy tightens,” he noted.

While economic growth in major emerging markets edged incrementally higher in Q1 to “almost 6 per cent year-on-year (from 5.75 per cent in Q4 2017)”, “mixed” underlying trends were at play.

While India continued to rebound with 7.75 per cent growth, China and Indonesia’s growth remained “relatively stable”, and Brazilian and Russian economic growth both dropped.

“While emerging market export volumes have remained comparatively strong (relative to the post-GFC period), growth appears to have slowed in March,” Mr Burg said.

“The risks associated with retaliatory trade actions in response to US trade policy fall more heavily on emerging markets (given the higher export share of GDP).”

Indeed, escalating trade tensions – particularly revolving around US’ tariffs – has led to an “uncertain” global trade environment.

“It appears that the current global upswing has peaked (or is near that point),” Mr Burg added.

“That said, despite signs, many short- and long-term interest rates have started to increase, or will do so over the forecast period”.

“Our forecasts still imply above trend growth in both 2018 and 2019 before easing back to the long-term average of 3.5 per cent in 2020.”

Advantedge requires paper copy signatures in NSW

From The Adviser

NAB’s wholesale funder and distributor of white label home loans – Advantagedge –  has announced that, as of today, it will require NSW mortgagors to sign mortgage documents on paper.

They said that until relevant legislation regarding the need for wet signatures on mortgage documents is amended in NSW, it would send a paper copy of the mortgage documents to customers to be wet-signed and witnessed.

NAB-owned white label provider Advantedge has said that it is updating its digital mortgage process for NSW customers, and is now requesting that mortgage documents be wet-signed by customers and witnesses.

Formerly, Advantede could accept electronically submitted mortgage documents without a paper copy. However, from Monday, 7 May, it will require NSW-based customers to sign mortgage documents issued in NSW on paper and to be witnessed.

It has said that it will post (or send by encrypted email to print depending on customer preference) mortgage documents for customers to sign with a witness, and return to its settlement agents, MSA National.

Despite this, Advantedge will continue to issue NSW mortgage documents electronically so there will be no delays with settlement.

It added that should the mortgage documents be submitted electronically, Advantedge would still process these “as normal” but would also send a paper copy of the mortgage documents to customers to be wet-signed and witnessed.

Advantedge clarified that the following documents can still be sent and signed electronically:

  • Letter to Borrower(s)
  • Loan Contract
  • Loan and Settlement Authority
  • Direct Debit Request
  • Business Purpose Declaration
  • Loan Terms and Conditions Booklet
  • Credit Guide
  • Borrower’s Guide to Construction Loans
  • MSA National’s Estimated Costs Statement

NSW mortgage documents issued prior to Monday, 7 May 2018, will be accepted without a wet signature.

Those issued after this date may still be submitted electronically but will need to be accompanied by a paper-signed and witnessed mortgage document.

Advantedge told The Adviser that, until relevant legislation regarding the need for wet signatures on mortgage documents is amended in NSW, it would send a paper copy of the mortgage documents to customers to be wet-signed and witnessed.

It added that this change only applied to Advantedge (and not NAB), as it involves the execution of mortgages.

Indeed, NAB announced just last week that it had launched DocuSign in the broker channel, allowing customers to sign their mortgage documents from anywhere and on any device.

NAB general manager of broker distribution Steve Kane said that this is another example of NAB’s ongoing commitment to improving the customer experience and to supporting brokers.

“By giving brokers the ability to have customers digitally sign their upfront documents, we are making the home loan process simpler, easier and more convenient,” Mr Kane said.

“We have eliminated the delays that can come with requiring a physical signature, for example, and we are confident this new tool will go a long way to help create a more streamlined process for brokers and for customers.”

Mortgage Distribution By Income Bands

In NAB’ results today they included this slide on the gross income distribution of households in their mortgage portfolio. Gross income is defined as total pre-tax unshaded income for the application. This can include business income, income of multiple applicants and other income sources, such as family trust income.  And it relates to draw-downs from Oct 17 – Mar 18. ~35% of transactions have income over 200K for owner occupied loans, and ~47% for investment loans.

Now, I recognise that NAB has a skewed demographic in their customers, but, the proportion of high income households looked odd to me.

So I pulled the household income data from our surveys, including only mortgaged households. We also ask for income on a similar basis, gross from all sources. And we plotted the results:

The blue bars are the household gross income across the country for mortgaged households. The next two are a replication of the NAB data sets above.

Either they are very, very good at targetting high income customers, or incomes in their system are being overstated. I will let others decide which is the correct answer. What do you think?

 

 

NAB Profit 16% Lower (PCP)

National Australia have released their 1H18 results. They were soft, but of most interest is the pressure on net interest margin, from both heightened competition in the mortgage lending segment, on lower growth, and higher funding costs.  This was offset by deposit repricing.  But Markets NIM was also down. Plus results were muddied by more restructuring costs and lower provisions, despite higher consumer arrears. Capital is lower than was expected. They also plan to sell, or float MLC, the bulk of their wealth management arm, which should provide some capital upside after 2019.

CEO Andrew Thorburn said “We continue to learn from our mistakes and respond by making changes to be better for customers. The commitment of our people to do the right thing is unwavering and together we are working to restore trust and respect in our industry, during and after the Royal Commission”.

The cash earnings was down 16% on the prior corresponding period (pcp) to $2,759m, which was below consensus.  This included $755m restructuring charges, so cash earnings, exceeding these were $3,289m, down 0.2% on 1H17 or down 1.8% on last half.  The statutory profit was $2,583m up 1.5% on pcp, but down 5.7% on the previous half.

The diluted earnings per share were $0.988 per share, down 17% and the cash RPE was 11.4%, down 260 basis points, or excluding restructuring costs down 40 basis points to 13.6%.

Revenue was up 2.5% on pcp to $9,093m with growth in housing and business lending lifting margins, but offset by lower Markets and Treasury income.

Overall Net interest margin was down 1 basis point. A rise of 5 basis points, reflecting repricing and lower funding costs was offset by the impact of the bank levy and housing competition and product mix changes.

They said if current short term funding costs continue to rise..

.. 2H18 NIM would be reduced by 2-3 basis points.

Expenses were up 25.3% of 5.4% excluding restructuring-related expenses. Net FTE were up from 33,422 to 33,944, which is interesting bearing in mind its plan to reduce 6,000 from existing FTE and add back 2,000 digital specialists by 2020.

Looking at the home lending portfolio, total loans rose from $295.1 billion in Sept 17 to $297.8 billion in March 18, the smallest rise for some time.

Housing revenue fell in 1H18, despite maintaining a 15.7% market share.

Housing NIM fell by four basis points in 1H18, as the effect of earlier repricing faded, and competition of loans increased.

Data on the portfolio shows that growth is stronger in owner occupied loans. However, the gross incomes appear to us to be significantly higher than the “average income” from households.  41.6% of draw-downs are via brokers compared with 34.6% in the portfolio.

They also said 54.1% of investment loans are interest only.  Interest Only loans are below the 30% Interest Only flow cap includes all new IO loans and net limit increases on existing IO loans. The cap excludes line of credit and internal refinances unless the internal refinance results in an increased credit limit (only the increase is included in the cap).

They said that the banks is using granular customer expense conversation and capture since late 2016 – across 12 expense criteria.  They use the greater of customer expense capture or income scaled Household Expenditure Measure (HEM).  Around 60% of mortgage applications have declared expenses above HEM since October 2014.

In 1H18 home loans drawn with Loan-to-Income (LTI) >6x was 9%, >7x was 3%. The  average LVR at origination is 69%. The dynamic LVR 43% (2% have >90% dynamic LVR).

They said 465 home loan files were reviewed by Ernst & Young as part of
APRA review of all major bank home loan policies, processes and controls. They found issues with verification of serviceability found in 23 files (5%), but on further review serviceability was proven for all but 1 file. None of the 23 files are in arrears.

Portfolio arrears are rising with 90 day+ past due now at 0.75%, up from 0.69% in September. This is worth $2.2 billion, up from $2.02 billion in September.

The rises are most noticeable in WA and QLD, but small hikes in other states too.

Arrears in the consumer credit portfolio are also rising.

Yet overall Group credit impairment charges declined 5.3% to $373 million, and declined 1 basis point to 13 basis points as a percentage of gross loans and acceptances.

Overall asset quality improved with the ratio of 90+ days past due and gross impaired assets to gross loans and acceptances down 14 basis points to 0.71%, thanks to improved conditions for New Zealand dairy customers and work-out strategies across Australian business lending.

The Group CET1 ratio was 10.21%, up 15 basis points from September 2017.

They still expect to meet APRA’s unquestionably strong target of 10.5% by 2020.  Their leverage ratio was 5.6%. The liquidity coverage ratio was 127% and the net stable funding ratio was 115%.

The announced the sale of MLC and other wealth management businesses with a view to evolving a simpler wealth offering through JBWere and nabtrade. They are targetting a separation by the end of 2019 via public market options including demerger and IPO whilst maintaining flexibility to consider trade sale options.  Subject to board and regulatory approval.

NAB Adds Samsung Pay

NAB customers can now use Samsung Pay to conveniently make contactless payments.

Samsung Pay is a secure and easy-to-use mobile payment service that allows users to add credit and debit cards from participating financial institutions, and loyalty cards from participating merchants.

NAB Executive General Manager of Consumer Lending, Angus Gilfillan, said Samsung Pay complements the bank’s mobile payments service, NAB Pay, which customers can already use on compatible Samsung and other Android devices.

“We are continuing to invest in giving our customers the best digital payments experience,” Mr Gilfillan said.

“We know Australians increasingly want to pay for their purchases quickly and conveniently. The growth in ‘tap and pay’, and take up of NAB Pay since we launched it two years ago, has been remarkable.

“By adding Samsung Pay, we’re giving our customers more choice in digital wallets.”

NAB customers can also use Samsung, Fitbit, and Garmin smartwatches to make contactless payments, and NAB will also be adding Google Pay to its suite of mobile payment services very soon.

“We see the highest number of NAB Pay transactions being made at supermarkets, restaurants, and at takeaway venues – which is exactly when you want to be able to make quick and easy payments,” Mr Gilfillan said.

Samsung Electronics Australia’s Head of Products and Services, Mark Hodgson, says Samsung is thrilled to be able to provide the Samsung Pay experience to even more Australians.

“Our partnership with NAB builds on our commitment to providing a simple and secure digital wallet experience to every Australian using a Samsung smartphone or wearable. We believe our collaboration with partners like NAB will help further enhance our mobile experience, and we look forward to evolving the portfolio further over the upcoming year.”

NAB also announced last year that it is working with the Commonwealth Bank of Australia and Westpac to build Beem It, a free app enabling anyone to make an instant payment using their smartphone, and to request payment from someone who owes them money or to split a bill.

“We are continually looking at all options to provide our customers with access to safe and secure ways to make digital payments.”

“From our own mobile banking app and NAB Pay, to a range of other payment platforms and services, we’re investing in solutions to help our customers use and manage their money. We’re very pleased to be launching Samsung Pay to our customers now,” Mr Gilfillan said.

NAB’s Mobile Banking App includes a range of world-leading features to help customers have more control over their cards. Features include the ability to switch on or off online transactions, overseas card usage, and ATM withdrawals, and to block, unblock, and replace a card that may have been lost.

The app also includes real-time alerts and merchant information, providing customers more information about their transactions straight away, and a range of options to help them know more about and manage their repayments and accounts.

‘No evidence’ that brokers limit switching: NAB

NAB, the owner of three of the larger mortgage aggregators, says Broker-originated loans are refinanced at “more than double” the rate of direct-channel loans in its new submission to the Productivity Commission; reports The Adviser.

In its second submission to the Productivity Commission (PC), released on Wednesday (21 March), the National Australia Bank (NAB) stated that it has found “no evidence” which suggests that the payment of trail commission has limited “switching” for broker-originated loans.

The big four bank responded to draft finding 13.1 of the PC’s draft report, which alleged: “The payment of trail commissions creates perverse incentives for brokers by rewarding them for keeping customers in their existing loan. Broker loyalty appears skewed towards the institution, not the customer, and thus likely discourages refinancing.”

In its submission, NAB noted that in the 2017 financial year (FY17), switching was more prevalent among borrowers with broker-originated loans.

“NAB has no evidence that incidence of switching is lower for mortgage broker-originated borrowers compared to those originated via direct channels,” the submission reads.

“In fact, refinance out rates for NAB’s mortgage broker-originated loans was more than double the rate of direct channels in FY17.”

The submission echoed the views put forward by NAB COO Anthony Cahill in his address to the PC on 5 March, stating that brokers are, in fact, rewarded for refinancing a client’s loan.

“[If] a broker were to assist a customer to move the loan to another lender, they would cease receiving a trail commission from the incumbent, but earn upfront and trail commission from the new lender.”

Further, the bank reiterated its view that trail commissions are paid as an incentive for brokers to “service customers on an ongoing basis” (which PC chair Peter Harris has questioned recently).

NAB highlighted the work the Combined Industry Forum was doing to improve commission structures and raise standards.

NAB concerned over “best interests duty”

The PC has also suggested that the Australian Securities and Investments Commission (ASIC) could impose a legal duty of care obligation on brokers and called for increased broker disclosure requirements.

In its submission, NAB said that a best interests duty “may be difficult to achieve practically” as “both mortgage products and customers themselves are not homogeneous and price is not the sole determinate of a good customer outcome”.

NAB added that it was “concerned” that applying a legal best interests duty only to brokers operating under lender-owned aggregators would create an “uneven playing field”.

The bank reiterated that bringing in a fee for service would be “detrimental to competition in the mortgage market” as it would see brokers “become unaffordable for customers”.

NAB also pointed out that proposals have already been put forward by the Combined Industry Forum (CIF) to improve broker and aggregator transparency.

The major bank also said that it does not believe the publication of median interest rates would benefit consumers, as it would “create unreasonable expectations, whereby all consumers anticipate receiving an interest rate at or below the median”.

“There are legitimate, risk-based reasons for customers to receive a price that is above a median rate; for example, high-risk loans require significantly more capital compared with low-risk loans, necessitating a different price strategy,” the major bank said.

‘Excessive’ bank CEO pay under scrutiny

From Investor Daily.

The disparity between bank CEO pay and average weekly earnings is contributing to the uncompetitive nature of Australia’s economy, argues progressive think tank The Australia Institute.

The GFC+10: Executive Pay in Australia report released yesterday by the Australia Institute has scrutinised the pay packages of executives at Australia’s biggest companies 10 years on from the global financial crisis.

Homing in on banks, which had “been a particular focus of attention” in recent times, the report found NAB and Commonwealth Bank of Australia bosses respectively earned 108 and 93 times the average weekly earnings in 2017.

“Pay for the NAB CEO peaked in 2004 but even if we ignore that spike the data still show that CEO pay was increasing rapidly during the bulk of the 2000s, as people were expressing the most concern.”

For the chief executive of CBA at the time, the spike in pay was widest in the lead-up to the global financial crisis.

In fact, seven- or eight-figure remuneration packages were “likely to have played an important role in the global financial crisis” wherein chief executives risked long-term performance for short-term gains, the report said.

Such a significant gap in the earnings of average workers compared with top executives also reflected “to a large extent the uncompetitive nature of the modern Australian economy”.

“It has to be stressed that the issue of massive CEO pay is one associated with industry concentration and the dominance of big business in the Australian economy,” it said.

“According to tax office data 390,774 companies reported a positive income and declared taxable income of $281 billion, giving the ‘average’ company an income of $719,201 in 2015.

“An economy dominated by ‘average’ companies could never pay CEOs anything like the amounts going to the CEOs of the top Australian oligopolies and monopolies,” said the report.

While “growth in CEO pay was quite dramatic in the lead up to around 2007 or 2008” and had moderated since then, the report concluded remuneration for these top executives “remains excessive”.

NAB launches super virtual assistant

From Financial Standards.

NAB has launched a digital assistant that helps MLC members engage with their superannuation.

Available on Google Home devices, Talk to MLC answers 15 common questions members ask: such as how to open an MLC account, find lost super and change investment options.

MLC customer experience specialist Peter Forster said the super fund expects most members to access superannuation in a way that’s convenient and personalised without the need for passwords.

He said millennials and older Australians will likely be the first to embrace Talk to MLC.

“The technology took us six weeks to develop and deploy, and we’re in the process of developing other technology at a similar speed that will help to reduce asymmetry of information and further benefit our customers,” Forster said.

He added in the near future MLC will be able to provide personalised tips to help members boost their super; project where their super balance will be at retirement time; and advise how best to invest their money in super.

NAB executive general manager of digital and innovation Jonathan Davey said the proliferation of voice-activated, hands-free devices such as Siri and Google Home and Amazon’s Alexa in the Australian market is reshaping consumer behaviour and expectations.

“We live in a world that wants instant gratification. We want quick answers and problems that are solved immediately – we don’t want to be left waiting. Our lives are busier than ever before,” Davey said.

Early this year, CBA launched Ceba, a chatbot that recognises about 60,000 consumer banking questions.

Ceba’s point of difference, according to CBA executive general manager digital Pete Steel, is that it can actually carry out tasks for customers, rather than providing instructions on how they can be done.

ANZ is also deploying chatbots with the help of Progress’ NativeChat, to enable customers to converse and transact with chatbots naturally. NASDAQ-listed Progress helps develop industry-specific and self-learning chatbots for organisations.

Banking Is Changing – A Case In Point – NAB and The Riverina

A release from NAB today.  Bye-bye branches.

In 2018, the way customers are banking in the Riverina and the surrounding areas has changed. Today, in response, NAB confirms changes to some of its branches in the area.

  • NAB invests $1.6M to improve branches in the Riverina and surrounding areas in 2017 and 2018.
  • Following consultation with local teams, NAB can confirm Ardlethan, Lockhart, Grenfell, Culcairn, Boort, Barham and Euroa branches will close in June.
  • Customers in these towns can continue to do their banking at Australia Post offices, including making deposits up to $10,000 cash or withdrawals up to $2,000 per day.
  • NAB continues to back the Riverina through its other NAB branches across the region, sponsorships, including NAB AFL Auskick, and by funding and advocating for infrastructure so regional areas can grow.
  • Our business and agri bankers will continue to service the areas.

Locally, NAB is investing more than $1.6M into improving branches in Cowra, Seymour and Kerang, completed last year, and Tatura, Alexandra and Griffith, scheduled to be completed by September 2018, including installing and upgrading 32 ATMs in the area. Many of these ATMs are ‘Smart ATMs’, where customers can make deposits, check balances, and withdraw cash so customers can bank at their convenience.

As improvements are made to some branches, other branches in the area will be closing. Between 80-90% of NAB customers in Ardlethan, Lockhart, Grenfell and Culcairn are using other branches in the area such as Temora, Wagga Wagga, Young and Holbrook. Similarly approximately 85% of customers using Euroa, Boort and Barham are using other branches .

NAB General Manager, Retail, Paul Juergens, explained the decision was a difficult one to make and was only made after careful consideration.

“While our branches continue to be an important part of what we do at NAB, the way our customers are banking has changed dramatically in recent years,” Mr Juergens said.

“Increasingly we find that our customers are banking at other branches, or prefer to do their banking online, on the phone, or through our mobile app.

“In the locations we are closing, more than 80% of our customers are also using our other NAB branches in the area.

“Importantly, we are continuing to support the Riverina and surrounding areas, including a $1.6M investment into other branches in the area as well as through local sponsorships.”

Mr Juergens emphasised that NAB wants to continue to help our customers with their banking.

“Over the coming weeks, we’ll be spending time with our customers explaining the different banking options available to them, including online banking and banking through Australia Post.

“We know that some NAB customers still like to bank in person, which is why we have a strong relationship with Australia Post offices, which offer banking services on NAB’s behalf.

“At Australia Post, NAB customers can do banking like check account balances, pay bills and make deposits up to $10,000 cash or withdrawals up to $2,000 per day.”

NAB is working with our local branch employees to discuss their next steps.

“When we make changes to our branches, we make every effort to find opportunities for our local teams at other branches in our network, and often this is possible. If we can’t find opportunities, we help our employees through The Bridge, our industry leading program where employees are provided up to six months of career coaching as they decide what’s next for them – whether that be retirement, pursuing a new career or starting a small business.”