The National Australia Bank has joined the chorus line of banks revealing extra costs from the Hayne royal commission’s proceedings this year for customer refunds (or ‘remediation’ as the banks like to obfuscate).
The NAB revealed additional costs of $314 million after tax in connection with its customer remediation program. Pre-tax the figure is closer to $400 million.
The bank said in a statement to the ASX that the costs would reduce its second-half cash earnings by an estimated $261 million and earnings from discontinued operations by an estimated $53 million.
It added that the customer remediation programs were expected to continue into the current 2018-19 financial year.
The NAB’s figure adds to the $235 million estimates from Westpac, around $441 million from the ANZ and at least $175 million from the Commonwealth which analysts will reveal a larger figure with a September quarter trading update early next month.
“Where we have let customers down we are determined to put things right. We have made good progress in resolving a number of issues that impacted our customers and we want to compensate them as quickly as possible,” NAB chief executive Andrew Thorburn said.
Mr. Thorburn will appear before the federal parliamentary banking inquiry in Canberra this Friday, where he will, like his peers at Westpac and the ANZ, will face questions over the misconduct exposed at the royal commission.
NAB had previously updated investors in August that it would be making extra provisions for compliance expenses.
NAB said yesterday the costs did not include its costs from its appearances and reaction to the royal commission, which are expected to be in the tens of millions of dollars.
The Commonwealth Bank’s full-year profit result revealed $155 million in costs associated with the inquiry (on top of the $700 million fine for its Austrac money laundering breaches).
The Commonwealth last week launched a remediation program for deceased estates and revealed around $20 million in refunds.
The experience of banks overseas, especially in the UK after scandals where the selling of unwanted or dodgy products is still costing banks heavily, has also been that compensation programs can take years to resolve. NAB signaled yesterday that future costs from the wealth misconduct claims remain uncertain.
“These customer remediation programs are expected to continue into FY19, with potential for further costs, which remain uncertain at this point in time,” NAB said.
In its market update, NAB said that the extra costs would not be excluded in its annual expense growth of 5% to 8%.
The bank said it remained “well positioned” to meet the “unquestionably strong” capital benchmark set by the Australian Prudential Regulation Authority by January 2020. All the big banks have made similar statements about their financial strength.
NAB shares rose 0.5% to $25.64.
