Tag: NAB

Property Dynamics Shifting – NAB

NAB released their Q4 2017 Property Survey.  They see property prices easing as foreign buyers lose interest, and a big rotation from the east coast.  Tight credit will be a significant constraint.

National housing market sentiment (measured by the NAB Residential Property Index) was unchanged in Q4, as big gains in SA/NT and WA (but still negative) offset easing sentiment in the key Eastern states (NSW and VIC).

Confidence levels also turned down, led by NSW and VIC, but SA/NT a big improver. SA/NT is now also the only state expected to record faster house price growth over the next 1-2 years, but prices are expected to grow fastest in QLD and fall in NSW. Income yields should however improve over the next 1-2 years as rental expectations exceed house prices in most states except QLD and WA. First home buyers (especially those buying for owner occupation) continue raising their profile in new and established housing markets, with their share of demand reaching new survey highs.

In contrast, the share of foreign buyers continued to fall in all states, except QLD (new property) and VIC (established housing), with property experts predicting further reductions over the next 12 months.

NAB’s view for 2018 is largely unchanged, but the degree of moderation has been ramped up – driven by revisions to Sydney. House prices are forecast to rise 0.7% (previously 3.4%) and remain subdued in 2019 (0.8%).

Apartments will under-perform, reflecting large stock additions and softer outlook for foreign demand.

Business Confidence Stronger – NAB

The recently released NAB monthly business survey to December 2017 reports a strong business sector in Australia at present, with conditions holding steady at well-above average levels and confidence almost catching up this month.

The business confidence index bounced 4pts to +11 index points, the highest level since July 2017, perhaps driven by a stronger global economic backdrop and closes the gap between confidence and business conditions.

Business confidence is strongest in trend terms in Queensland and SA and to a lesser extent NSW. Confidence is also reasonable in WA, and is in line with business conditions in the state. Victoria and Tasmania meanwhile are reporting levels of confidence which are lower than their reported level business conditions.

Mining and construction are the most confident, with the latter picking up in recent months after trending down between July and October, suggesting that a positive outlook for non-residential construction may be offsetting any concerns around apartment oversupply and a slowdown in the Sydney housing market. In contrast, retail confidence is surprisingly strong, and well above reported conditions. The retail industry has been a consistent underperformerin the NAB Business Survey, and is the only industryreporting negative business conditions.

The employment index pulled back a little in December, and while it remains consistent with a solid rate of job creation, it does suggest employment growth may ease back from current extraordinary heights.

But whether this will begin to lift wages growth is another question, with labour costs rising.

Financial Advice Conflicts Still Exists In Vertically Integrated Firms

An Australian Securities and Investments Commission (ASIC) review of financial advice provided by the five biggest vertically integrated financial institutions has identified areas where improvements are needed to the management of conflicts of interest. 68% of clients’ funds were invested in in-house products.

This highlights the problems in vertically integrated firms, something which the Productivity Commission is also looking at.

The review looked at the products that ANZ, CBA, NAB, Westpac and AMP financial advice licensees were recommending and at the quality of the advice provided on in-house products.

The review was part of a broader set of regulatory reviews of the wealth management and financial advice businesses of the largest banking and financial services institutions as part of ASIC’s Wealth Management Project.

The review found that, overall, 79% of the financial products on the firms’ approved products lists (APL) were external products and 21% were internal or ‘in-house’ products. However, 68% of clients’ funds were invested in in-house products.

The split between internal and external product sales varied across different licensees and across different types of financial products. For example, it was more pronounced for platforms compared to direct investments. However, in most cases there was a clear weighting in the products recommended by advisers towards in-house products.

ASIC noted that vertical integration can provide economies of scale and other benefits to both the customer and the financial institution. Consumers might choose advice from large vertically integrated firms because they seek that firm’s products due to factors such as convenience and access, and recommendations of ‘in-house’ products may be appropriate. Nonetheless, conflicts of interest are inherent in vertically integrated firms, and these firms still need to properly manage conflicts of interest in their advisory arms and ensure good quality advice.

ASIC will consult with the financial advice industry (and other relevant groups) on a proposal to introduce more transparent public reporting on approved product lists, including where client funds are invested, for advice licensees that are part of a vertically integrated business. ASIC noted that any such requirement is likely to cover vertically integrated firms beyond those included in this review. The introduction of reporting requirements would improve transparency around management of the conflicts of interests that are inherent in these businesses.

ASIC also examined a sample of files to test whether advice to switch to in-house products satisfied the ‘best interests’ requirements. ASIC found that in 75% of the advice files reviewed the advisers did not demonstrate compliance with the duty to act in the best interests of their clients. Further, 10% of the advice reviewed was likely to leave the customer in a significantly worse financial position. ASIC will ensure that appropriate customer remediation takes place.

Acting ASIC Chair Peter Kell said that ASIC is already working with the major financial institutions to address the issues that have been identified in the report on quality of advice and management of conflicts of interest.

‘There is ongoing work focusing on remediation where advice-related failures have led to poor customer outcomes, and the results of this review will feed into that work,’ said Mr Kell.

ASIC is already working with the institutions to improve compliance and advice quality through action such as:

  • improvements to monitoring and supervision processes for financial advisers; and
  • improvements to adviser recruitment processes and checks.

ASIC will continue to ban advisers with serious compliance failings.

ASIC highlighted that the findings from this review should be carefully examined by other vertically integrated firms. ‘While this review focused on five major financial services firms, the lessons should be considered by all vertically integrated firms in the financial services sector.’

Download the report

Australian SMSF investors remained red hot for equity in 2017 – NAB

NAB says that appetite for equity investing among Australian Self-Managed Super Fund (SMSF) investors surged in 2017, with international shares, domestic exchange traded funds, mFunds and partially paid shares the top new investment picks for investors.

The nabtrade data, which looked at the equity trading patterns of SMSFs in the 12 months to 15 December, showed this group of investors had almost tripled their investment in mFunds, and raised their holdings in ETFs and partially paid shares by 55 per cent and 51 per cent respectively.

Preference shares were equally popular with SMSF investors, with holdings up 34 per cent. Traditional equity holdings were also solid, up 13.5 per cent, while SMSFs retreated from investing in floating rate notes and options over the same period.

NAB Director of SMSF and Customer Behaviour, Gemma Dale, said SMSF investors were overall very active in equity markets in 2017, with total portfolios up more than 15 per cent on the previous year.

“The analysis shows that investors are getting comfortable with the more exotic equity instruments in the market and are prepared to spread risk. Low levels of volatility and the strong performance of domestic and international markets gave investors’ confidence to look for new opportunities,’’ Ms Dale said.

“As with previous years, financials and materials were the most heavily traded sectors, accounting for 36 per cent and 17 per cent of the turnover in 2017. NAB, Commonwealth Bank and Telstra were the most traded stocks in 2017.

“Telecommunication services, healthcare and consumer discretionary stocks were also popular among investors.”

The data also showed SMSF investors are also getting more confident in international equity investing and prepared to take bets on new and innovative sectors such as robotics and aerospace using ETFs.

“International trading surged nearly 100 per cent over the previous year, with US equities and US ETF’s the most traded equity instruments on international markets throughout the year,’’ Ms Dale said.

‘’Like retail investors, SMSF investors are turning to offshore markets to diversify their portfolios and to access high growth sectors in the US.’’

Most popular equity investments by SMSF Investors in 2017
Top Ten Domestic Equity instruments in 2017
NATIONAL AUSTRALIA BANK. Ordinary Fully Paid
COMMONWEALTH BANK OF AUSTRALIA. Ordinary Fully Paid
WESTPAC BANKING CORPORATION. Ordinary Fully Paid
AUSTRALIA AND NEW ZEALAND BANKING GROUP. Ordinary Fully Paid
TELSTRA CORPORATION. Ordinary Fully Paid
BHP BILLITON. Ordinary Fully Paid
WESFARMERS. Ordinary Fully Paid
CSL. Ordinary Fully Paid
WOOLWORTHS GROUP. Ordinary Fully Paid
WOODSIDE PETROLEUM. Ordinary Fully Paid
Source: nabtrade

Top Ten International Equity instruments in 2017
AMAZON COM ORD Common Stock
APPLE ORD Common Stock
FACEBOOK CL A ORD Common Stock
ALIBABA GROUP HOLDING ADR REP 1 ORD Depositary Receipt
ENPHASE ENERGY ORD Common Stock
TENCENT ORD Common Stock
TESLA ORD Common Stock
NVIDIA ORD Common Stock
MICROSOFT ORD Common Stock
BANK OF AMERICA ORD Common Stock
Source: nabtrade

Australians in for a Boon With New Super Changes in 2018

NAB says that Australians who are looking to buy their first home or are preparing for retirement could be in for a windfall in 2018, with a number of key superannuation changes expected to come into effect.

NAB Director of SMSF and Customer Behaviour, Gemma Dale said a number of key super reforms are expected to come into effect this year, so it’s important consumers stay on top of these change to ensure they capitalise on the opportunities.

“One of the big changes this year is the Downsizer contribution, which allows individuals aged 65 years plus to make non-concessional contributions of up to $300,000 per person to their super from the proceeds of selling their main residences,” Ms Dale said.

“But it is important to note that these contributions only apply to contracts of sale entered into from 1 July 2018, and the property also needs to be owned for at least 10 years before disposal.’’

Another key change is the first home super saver scheme.

“This scheme will allow eligible individuals who make voluntary super contributions from 1 July 2017 to withdraw these contributions, together with associated earnings for the purpose of purchasing their first home,” Ms Dale said.

“These voluntary contributions will be limited to $15,000 per year, up to a total of $30,000, and count towards the relevant contribution cap.

“Eligible individuals will be able to have up to 100 per cent of non-concessional and 85 per cent of concessional contributions plus associated earnings withdrawn from super to purchase their first home from 1 July.

“However, it is important to note, that the legislation for this scheme is yet to be passed, so there is a risk any voluntary contributions made in anticipation of it could be locked into individuals’ super.”

From 1 July, individuals with super balances of less than $500,000 on 30 June of the prior financial year will be able to access a higher annual cap and contribute their remaining unused concessional contribution cap on a rolling basis for a period of five years. But only unused amounts accrued from 1 July 2018 can be carried forward.

“This measure will enable customers who take time out of work or work part-time to make catch-up contributions when they accumulate lumpy income or decide to work full-time,’’ Ms Dale said.

Ms Dale encouraged Australians to seek advice before making any decisions to ensure it is in their best interest.

Some key super changes expected to come into effect from 1 July 2018

  • First home super saver scheme – This scheme allows eligible individuals who make voluntary super contributions on or after 1 July 2017 to withdraw these contributions, together with associated earnings for the purpose of purchasing their first home. These voluntary contributions are limited to $15,000 per year, up to a total of $30,000 and count towards the relevant contribution cap.
  • Downsizer contributions – The Government introduced a Bill in September 2017 allowing individuals aged 65 years or over to make non-concessional contributions of up to $300,000 (per person) to their superannuation from proceeds of selling their main residences
  • Catch-up contribution concessions – Individuals with super balances less than $500,000 on 30 June of the prior financial year will be able to access a higher annual cap and contribute their remaining unused concessional contribution cap on a rolling basis for a period of five years. Only unused amounts accrued from 1 July 2018 can be carried forward.

NAB refunds $1.7 million for overcharging interest on home loans

ASIC says National Australia Bank Limited (NAB) has refunded $1.7 million to 966 home loan customers after it failed to properly set up mortgage offset accounts.

Following customer complaints, NAB conducted an internal review which found that between April 2010 and August 2017 it had not linked some offset accounts to broker originated loans. This resulted in those customers overpaying interest on their home loan.

NAB has refunded affected customers so that they are only charged interest that would have been payable had the mortgage offset account been properly linked from the commencement of the home loan.

‘Consumers should be confident that when they sign up for a home loan they are receiving all of the benefits that are being promoted,’ Acting ASIC Chair Peter Kell said.

‘Where there are errors there should be timely and appropriate action to ensure that consumers are not any worse off as a result of the mistake.’

NAB reported the issue to ASIC. NAB has also engaged PwC to review the remediation approach and to ensure NAB’s compliance systems will prevent a similar error from occurring in future.

NAB has commenced contacting and refunding affected customers.

Background

An offset account is a savings or transaction account that is linked to a home loan account. Any money in the offset account reduces the amount of interest payable on the linked home loan. For example, if the outstanding balance on the home loan is $300,000 and there are savings of $50,000 in the offset account, then interest is only payable on the difference ($250,000).

In this case, NAB failed to link some offset accounts to home loan accounts, which meant that money held in those offset accounts did not reduce the interest payable on the home loan accounts. As a result, consumers paid more in interest than was required.

NAB also conducted a broader investigation which found that the issue only applies to broker originated loans.

NAB will also remediate customers who had an offset account during the relevant period but had repaid their home loan before 2017.

NAB said:

In February 2017, NAB commenced a review into how it processes offset account requests for customers who apply for a home loan through a Broker, looking back to 2010.

This review found that some customers may not have had their offset account correctly linked to their home loan, and that these customers may have consequently paid additional interest.

We sincerely apologise to our customers for this, which was due to administration errors.

All of the customers identified through this review with an open account have been contacted and received refunds. They represent 0.73% of the total number of offset accounts established through our Broker channel since 2010 (approximately 178,000).

NAB advised ASIC about this matter earlier this year, and, over the past 12 months, has implemented a number of measures to improve offset origination processes, and enhanced the ability for customers to review their offset arrangements themselves.

NAB Launches Online SME Unsecured Lending Product

In a nod to the emerging Fintech SME lending sector, NAB today announced $100,000 unsecured lending for Australian small business owners to grow and expand, backing the strength of their business without the need for security requirements such as property or cash, with a decision is around 10 minutes.  As we discussed recently, getting funding for SME ex. security is tough.

The rates look highly competitive at 13.85% relative to many of the other Fintech alternatives.

Customers apply via a fast and simple digital application process, with conditional credit approval granted in minutes. Once application contracts are signed and returned, cash is delivered within 24 hours.

Executive General Manager Business Direct and Small Business Leigh O’Neill said NAB recognises that fast and easy access to funds is critical for small businesses as they grow.

“There is often a perception that access to credit is difficult without a property or other major asset to secure against. That’s why we’ve responded by placing more emphasis on the strength of the business rather than traditional physical bricks and mortar, and we’re doing this at a fair and competitive price,” Ms O’Neill said.

NAB is the only Australian bank to have developed in-house an unsecured online lending tool without a third party referral involved. QuickBiz first launched in June 2016, initially up to $50,000.

The new $100,000 QuickBiz loan is an extension to NAB’s existing unsecured, self-service digital financing facilities, which includes an overdraft and credit card, all unsecured and capped at $50,000 for eligible customers.

“Six months after a QuickBiz loan application, just under half of our customers grew their business turnover by greater than 10 percent. This confirms we have an important role to play by offering finance to businesses with good prospects- it’s the the kick-start they need.”

“Small businesses are the backbone of the Australian economy. We need all parts of the economy – big business, government and industry – to get behind them to move the country forward.”

NAB’s Unsecured Solutions Fast Facts:

  • Unsecured QuickBiz loan, up to $100,000 available for eligible Australian SMEs
  • Direct connectivity to Xero or MYOB data, or simple financial upload from any accounting package
  • Application and decision in under 10 minutes
  • Competitive and transparent annualised interest rate charges, 13.85 % – no hidden surprises

For more information on the entire QuickBiz product suite (loan, overdraft) and Low Rate NAB business cards),

ASIC accepts enforceable undertakings from ANZ and NAB to address conduct relating to BBSW

ASIC says Australia and New Zealand Banking Group (ANZ) and National Australia Bank (NAB) have today entered into enforceable undertakings (EUs) with ASIC in relation to each bank’s bank bill trading business and their participation in the setting of the Bank Bill Swap Rate (BBSW), a key Australian benchmark and reference interest rate.

On 10 November 2017, the Federal Court made declarations that each of ANZ and NAB had attempted to engage in unconscionable conduct in connection with the supply of financial services in attempting to seek to change where BBSW set on certain dates (in respect of ANZ, on 10 occasions in the period 9 March 2010 to 25 May 2012, and in respect of NAB, on 12 occasions in the period 8 June 2010 to 24 December 2012). The Court also declared that each bank failed to do all things necessary to ensure that they provided financial services honestly and fairly.

The Federal Court imposed pecuniary penalties of $10 million each on ANZ and NAB for the attempts to engage in unconscionable conduct in respect of the setting of BBSW. The Court also noted that each of ANZ and NAB will give EUs to ASIC which provides for them to take certain steps and to pay $20 million to be applied to the benefit of the community, and that each will pay $20 million towards ASIC’s investigation and other costs.

Background

ASIC commenced legal proceedings in the Federal Court against ANZ on 4 March 2016 (refer: 16-060MR) and against NAB on 7 June 2016 (refer: 16-183MR). The EUs form part of an agreed resolution to those proceedings.

On 16 November 2017 Jagot J of the Federal Court published her decision in both the ANZ and NAB proceedings ([2017] FCA 1338).

On 5 April 2016, ASIC commenced legal proceedings in the Federal Court against the Westpac Banking Corporation (Westpac) (refer: 16-110MR). These proceedings are ongoing.

ASIC has previously accepted enforceable undertakings relating to BBSW from UBS-AG, BNP Paribas and the Royal Bank of Scotland (refer: 13-366MR, 14-014MR, 14-169MR). The institutions also made voluntary contributions totaling $3.6 million to fund independent financial literacy projects in Australia.

In July 2015, ASIC published Report 440, which addresses the potential manipulation of financial benchmarks and related conduct issues.

The Government has recently introduced legislation to implement financial benchmark regulatory reform and ASIC has consulted on proposed financial benchmark rules.

NAB Will Remediate 2,300 Home Loans

NAB has said it has commenced a remediation program for some of its customers, after a review identified their home loan may not have been established in accordance with NAB’s policies.

It follows the completion of an extensive review by NAB which identified around 2,300 home loans since 2013 that may have been submitted without accurate customer information and/or documentation, or correct information in relation to NAB’s Introducer Program.

NAB first became aware of the matter in October 2015, and advised ASIC in December 2015 after an initial high-level review. Since then, NAB has provided regular updates to ASIC on the progress of its investigation.

“What occurred was unacceptable. We have investigated this matter thoroughly, and, as we have always said, whenever we find issues we will investigate them, fix them, and hold people to account – and we did,” NAB Chief Customer Officer, Consumer Banking and Wealth, Andrew Hagger, said.

As a result of NAB’s review, 20 bankers in New South Wales and Victoria had their employments terminated, or are no longer employed by NAB, and an additional 32 bankers had consequences applied including the reduction of remuneration.

NAB has commenced writing to the around 2,300 customers – many of whom live overseas – asking them to participate in a detailed review of their loan, which may include verification of documents submitted at the time of their home loan application. Affected customers may be offered compensation as appropriate.

NAB has engaged with ASIC to ensure the remediation program provides fair outcomes for customers. The remediation program has been designed with reference to the methodology applied by the Financial Ombudsman Service, and with NAB’s standard approach to compensating customers. NAB will engage an independent expert to undertake regular audits of the remediation program, and will update ASIC every two months on its progress.

“I want to assure all of our customers that we have improved our systems, processes and programs as a result of what occurred here,” Mr Hagger said.

This includes changes to NAB’s Introducer Program, including enhanced governance and eligibility criteria.

Customers who receive letters to participate in the remediation program are encouraged to contact NAB on the phone number provided to them. Any NAB customer who is not part of the remediation program, but who has a query about it or their home loan, can contact NAB

 

NAB streamlines loan process for brokers

From Australian Broker.

National Australia Bank (NAB) has announced a series of changes that will make its digital home loan capabilities more efficient for brokers and their clients.

The bank has introduced two online verification tools, IDme and ZipID, that allow brokers to securely collect customer identification from their mobile devices. NAB will also add DocuSign to its suites of tools in 2018 so customers can sign documents anywhere from their phone or tablet.

“We are focused on using smart technology to make it easier for brokers to both collect customer information and submit documentation, simplifying the home loan process,” said Steve Kane, NAB general manager of broker distribution.

These improvements have been rolled out as part of the bank’s Helping You Accelerate campaign which seeks to enhance the home loan experience for both brokers and customers.

Brokers will gain access to a variety of digital tools and personalised support from NAB to help guide them through the home loan process and deliver a positive experience to clients.

“In 2017 we have made a range of changes to make submitting home loan applications easier, simpler and more efficient for brokers and their customers,” said Kane.

The Helping You Accelerate campaign will help brokers get the most out of the support NAB offers by integrating its tools and assistance into a simple, step-by-step guide, he added.

“It’s yet another way we are showing our commitment to the broker channel.”

Over the past 12 months, NAB has rolled out a number of other initiatives to assist brokers such as its renewed small business offerings for SME clients and the Customer Adviser Broker Program which saw the bank install support experts in more than 20 branches with the specific remit of on-boarding broker clients.

“These initiatives are just a few examples of how NAB is listening to the insights of our brokers and continually improving the broker-customer experience. It’s just one step closer to becoming the bank for brokers,” Kane said.