NAB Reprices Mortgages

NAB has announced a range of changes to its home loan interest rates, including a new special fixed rate for first home buyers – the lowest rate ever offered by NAB – and increases to interest rates for new and existing owner occupier and residential investor borrowers.

NAB Chief Operating Officer Antony Cahill said: “The decisions we make on interest rates are difficult ones, and we want to assure our customers we do not take them lightly as we seek to achieve the right balance for all our stakeholders while considering the dynamic financial and economic environment in which we operate.

“The difference between what we charge and how much it costs us to fund a mortgage remains under pressure, with intense competition, increasing regulation, and elevated funding costs.

“By making a series of changes, both up and down, we are seeking to balance these across our entire mortgage portfolio.”

Mr Cahill added: “Interest rates remain at near historic lows, and around 85 per cent of NAB customers pay below our current standard variable rate through a range of discounts available on our home loan products, including NAB Choice Package, and our highly competitive fixed rate terms.

“We understand these changes will affect customers in different ways, and we always encourage customers to have a conversation with their banker or broker about what home loan suits them best.”

First Home Buyers

From today, NAB is offering first home buyers a record low 3.69% per annum fixed rate for two years, for owner occupier, principal and interest loans. This compares to NAB’s current advertised 2 year Package Fixed Rate for Home Loans rate of 3.98% per annum.

“Every dollar counts when you’re buying your first home, and this offer for first home buyers will provide real support to Australians wanting to enter the property market,” Mr Cahill said.

“This is the lowest home loan rate ever offered by NAB, and it will help Australians entering the property market for the first time to achieve their home ownership dreams.”

Eligible customers will save around $50 a month in repayments over the two year fixed period with this special offer (based on a $300,000 loan).

NAB has also recently introduced changes to help more first home buyers secure a home loan.

“We know it can be hard for prospective first home buyers to save for a deposit and rent at the same time, so we now recognise rental history as a form of ‘genuine savings’ in home loan applications,” Mr Cahill said.

Owner Occupiers

NAB’s Variable Rate for Home Loans (Standard Variable Rate) for owner occupier customers will increase by 0.07% per annum, to 5.32% per annum, from Friday 24 March 2017.

This change will see NAB customers with a standard variable rate home loan pay an extra $13 each month on their home loan principal and interest repayments (based on a $300,000 loan over a 30-year term).

“I encourage customers who want certainty about their repayments, or to find out what other options are available, to speak with their banker or broker, and whether a package, fixed rate, or split home loan might be right for their circumstances,” Mr Cahill said.

Residential Investor Borrowers

From Friday 24 March 2017, NAB’s Variable Rate for Residential Investment Home Loans will increase by 0.25% per annum, to 5.80% per annum.

Mr Cahill said the investor segment continues to be important to NAB. Given strong growth in the investor segment, it is essential that NAB continues to manage its investor portfolio responsibly.

“We’re committed to managing our investor lending growth in line with the regulator’s guidance,” Mr Cahill said.

Effective Friday 24 March 2017, two broker products which are no longer available to new borrowers – the NAB Homeplus Rate and the NAB Homeplus Residential Investment Rate – will also increase by 0.07% per annum and 0.25% per annum respectively, to 5.35% per annum and 5.83% per annum. NAB will also increase Line of Credit products by 0.25% per annum. NAB Business Options Loans will also increase by 0.07% per annum. Conditions, fees and eligibility criteria apply to NAB’s products.

Business Confidence Slides In February

The February NAB Business Survey gave back the surprisingly strong gains seen in the previous month. But the overall results are still quite positive, and not uniform across the states.

Some payback was flagged in last month’s Survey as temporary factors were thought to have been behind much of the spike in both business conditions and confidence. However, despite the pull-back, both of these indicators remain at levels consistent with solid business activity in the near-term, and are higher than through much of H2 2016.

The business conditions index dropped by 7 points in February, more than unwinding the 6 point jump in January, to be at +9 index points – still above the series long-run average. The fall in business conditions was reflected across all three components of the index (trading conditions/sales, profitability and employment), although the bulk of the deterioration seems to have come from sales, which is now noticeably weaker than it was back in December. Profitability did not spike with the other components in January and saw only a small moderation. Employment also weakened slightly, but is still well up on December levels – an strong outcome and indicative of a strengthening underlying trend (which has been more encouraging than ABS labour market statistics). By industry, we remain concerned about retail conditions, but all other industries (including mining) recorded positive business conditions in February. Additionally, conditions are looking good across most states, with WA the main exception. Cost price measures in the Survey were mixed, although labour costs held up and retail prices accelerated (but are still relatively soft).

NAB’s Business confidence index dropped back a little as well in the month, but is still suggesting that business sentiment remains relatively upbeat – consistent with the overall tone seen in financial markets. The business confidence index fell 3 points to +7 index points in February, which is slightly above the series long-run average. Other indicators were reasonably solid as well, with capacity utilisation rates holding up, consistent with a solid (albeit easing) read on capital expenditure. Forward orders, however, continue to look relatively muted.

A drop in activity indicators had been anticipated for the February NAB Monthly Business Survey, meaning these results do not fundamentally change NAB’s outlook for the economy. Indeed, business conditions are still at quite lofty levels, consistent with our expectation for the economy to enjoy solid rates of growth in the near-term. There are, however, still some points of concern such as the persistent weakness evident in retail conditions, which warrant close monitoring. Additionally, it is the longer-term growth picture that is more concerning, particularly as the contribution from LNG exports, temporarily higher commodity prices and the residential construction boom fade, putting pressure on the labour market. However, the RBA is increasingly putting emphasis on financial stability concerns, which is likely to impact the response of monetary policy.

By state, outcomes were quite mixed in this month’s Survey, although most states are generally looking quite solid. NSW and WA saw the largest falls in business conditions, down 6 and 9 points respectively, although conditions in NSW still look quite good at +14 index points. WA on the other hand was very weak at -11 index points, the only state to be negative, despite positive conditions reported nationally in the mining industry. In contrast, SA saw a very large increase in conditions during the month. Looking through the monthly volatility, NSW maintains the highest conditions in trend terms (+17), followed by Victoria (+14). Meanwhile, WA is weakest (-5), followed by Qld (+5). In terms of confidence, Queensland is best in trend terms (see p8 for details).

NAB Ventures backs San Francisco payments fintech

National Australia Bank’s (NAB) venture capital fund, NAB Ventures, has led an investment round in San Francisco-based foreign exchange payments company Veem.

Veem (formerly known as Align Commerce) provides a platform that leverages blockchain technology for cross-border business to business payments, enabling organisations to send and receive payments in local currency.

NAB Ventures General Partner Melissa Widner led the series B funding round totalling USD 25 million, which also included investments from GV (formerly Googles Ventures), American VC firm Kleiner Perkins Caufield & Byers, Silicon Valley Bank and Japanese fund SBI Investment Co. Ltd.

“Technology in the global payments and foreign exchange space is evolving rapidly as customers identify new platforms to help them do business quickly and easily,” Ms Widner said.

“We identified Veem as a market leader in both technology and business model. This investment forges a close relationship with the company that will provide insights into user expectations of where technology is heading for cross-border payments.

“We’re excited to be working with Veem; their platform provides customers with a great user experience, low fees, fast clearance and great transparency.

“As Australia’s largest business bank, we’re continually looking at services that have the potential to make life easier for our business customers,” said Widner, who will join the Veem board following NAB Ventures’ investment.

Veem CEO and Co-Founder Marwan Forzley said: “At Veem, we understand even ‘mum and dad’ businesses must embrace globalisation to compete with incumbents, grow their businesses and innovate.

“Unfortunately, the current international payments experience is fundamentally broken, stifling SMBs’ globalization efforts. Veem’s platform creates an experience that is as simple and frictionless as the current process is cumbersome and frustrating.”

Randy Komisar Partner, Kleiner Perkins said: “We’re excited to be investing in Veem, along with a number of other high calibre funds from across the globe, including NAB, who impressed us with the way they managed and led this funding round. Business to Business foreign exchange payments is undergoing massive change and we’re looking forward to working alongside all of the other investors in Veem, including NAB, in the future.”

The deal is NAB Ventures third investment, following announcement of a stake in Sydney startup Data Republic last year, along with seed investment in health tech Medipass Solution in February.

See Veem’s media announcement here: https://veem.com

NAB Fires Senior Managers For Poor Conduct

In his opening address to the Parliamentary Committee today NAB’s CEO Andrew Thorburn highlighted enforcement of behavioral standards in the the bank.

Accountability; accountability is a fundamental principle in our bank. It’s my role to make sure that executives know what they’re accountable for and what behaviour is expected of them. This is then cascaded all the way down through the bank.

We have four key accountability areas. These are consistent through our company. The four are: customers, risk management, financial performance and team or people.

In addition to that, wrapping around it is our company values and our code of conduct. Feedback is then provided to people on a monthly basis and then at the half way point and at the full year we wrap that all up in a rigorous, disciplined and serious way.

But there are consequences for people if our behavioural standards are not met.

Since I was here last, we’ve completed our financial year 2016 year and over that year there were 1138 people in our bank who were deemed to have not met our code of conduct.

This follows a discipline review in every case by a specialist team that we have. The consequences for those people ranged from a formal warning, through to dismissal. It also involves a reduction or elimination of any bonus.

Of the 1138 there were five senior managers – two were dismissed, and three faced other disciplinary action.

We also went back and looked at issues over the past two years, applied this standard and we’ve taken similar action against 48 additional people.

Also, since we were here last we’ve made it a formal policy in the bank, that any prudential breach must be investigated by a dedicated and specialist team.

The message here to all our people is that we are in a position of trust. We have high standards, they are expected to be met and if they are not there are consequences.

NAB hires former NSW premier

National Australia Bank Group Chief Executive Officer, Andrew Thorburn, today announced three new appointments to the NAB Group Executive Leadership Team.

The appointments are:

  • Mike Baird, as Chief Customer Officer, Corporate & Institutional Banking
  • Sharon Cook, to the new role of Chief Legal & Commercial Counsel
  • Patrick Wright, as Chief Technology & Operations Officer

“Mike, Sharon and Patrick each bring to NAB exceptional track records of performance and delivery and will help accelerate the execution of our strategy so we can deliver for our customers and our shareholders,” Mr Thorburn said.

“They are also authentic, inspiring and passionate leaders whose values align with NAB’s values and our ambition to be Australia and New Zealand’s most respected bank.”Mr Thorburn added:“Mike started his career with NAB in 1989 and spent 17 years working in corporate and institutional banking roles in Australia and overseas with NAB, Deutsche Bank and HSBC, before entering politics. His time as Treasurer and Premier of New South Wales means he returns to banking and NAB with invaluable experience in leading economic and financial reform to grow the economy. Mike has outstanding leadership and a determination to drive change and make a difference by building relationships with customers and the community”.

“Sharon is a vital addition to the team, bringing more than 25 years’ experience in the legal profession, most recently as a Managing Partner with King & Wood Mallesons. She has extensive experience in the banking and financial sector and is highly regarded for her commercial and strategic approach to complex issues.In a period of significant industry reform and heightened public focuson banking, this is a new and important role on our Executive Leadership Team”.

“Patrick joins NAB from Barclays in the US where he is global Chief Operations & Technology Officer of Barclaycard, leading a team of 15,000 people.He has extensive experience in driving major transformations in large financial services companies and innovating in fast-paced, competitive and highly-regulated markets.As we reshape our business, Patrick will lead our simplification, digitisation and automation agenda to deliver greater efficiency and create a simpler and easier experience for our customers and bankers.”

These appointments follow extensive global searches. All the roles on the NAB ExecutiveLeadership Team are now filled. Subject to regulatory approval, Mike and Sharon will start with NAB in mid-April, and Patrick will commence in mid-May.

The Future Is… Uncertain

Australians and businesses overwhelmingly think our country is a great place to live and have a business. However, Australian consumers and businesses are anxious about what the future holds.

National Australia Bank (NAB) today released a new report which asks consumers and businesses to explore life, work and running a business in Australia – now and in the future.

“Nine in 10 Australians told us our country’s open spaces, people and lifestyle and access to affordable and quality healthcare are the biggest contributors to liveability and their choice to call Australia home,” NAB Chief Economist Alan Oster said.

“There are some clear differences between states. Consumers in SA/NT are much more positive in relation to travel time, living costs and housing – and in Victoria, a love of sport means entertainment options feature more prominently for liveability than any other state.”

Businesses too are optimistic, with 8 in 10 (82%) surveyed viewing Australia as a great place to have a business.

“Australian business people see the economy, our close proximity and strong connections to Asia and the growing population as some of Australia’s key strengths,” Mr Oster said.

“Making the most of these strengths is vitally important for Australia, to support more growth opportunities for businesses and the millions of Australians they employ.”

But despite their current optimism, the report found only 1 in 2 people and 60% of businesses think Australia will be a great place to live and have a business in 10 years’ time.

“There is a clear message of anxiety in the future coming from Australian consumers and businesses,” Mr Oster said.

“Australians identified access to social welfare, living costs, tax levels, jobs and housing affordability as the key factors they expect will deteriorate the most in the next 10 years. Consumers are saying they expect very little progress in the areas already holding Australia back now.

“While a person’s income didn’t affect current perceptions of liveability, there was a large future disconnect between high income earners (earning over $100,000) and those earning under $35,000 a year.”

Businesses are slightly more optimistic.

“Australian businesses expect the things that make our country great now to continue to make us great in the future – this includes our population, proximity to Asia and our innovative and entrepreneurial economy.”

“These insights on how Australians feel about our country may be able to help businesses and governments discover what we’re concerned about, and prompt discussion on how to tackle some of the big issues,” Mr Oster said

About 2,300 consumers and 500 businesses took part in the survey, and full findings can be viewed here.

Consumer Spending Patterns Vary Significantly

In a new report NAB explores the spending behaviours of their customers. At the top level, the data shows that whist average growth in spending was 3.1%, ACT let with 4.8% whilst in WA spending went backwards in the 4Q16.

 

 

Customer spending in Australia – based on NAB’s transaction data (including BPAY) – grew 3.1% y/y in Q4 2016,with average monthly spending during the quarter of $2,117 in metropolitan areas and $1,949 in regions.

Spending growth in Regional areas (3.5%) outpaced Greater Metropolitan or “City” areas (2.9%).

By capital city area (based on ABS definitions), spending growth was fastest in Hobart (4.1%), Sydney (3.9%)and Melbourne (3.7%) and slowest in Perth (-0.4%) and Brisbane (1.7%).

In regional areas, it was fastest inNSW (4.7%) and VIC (3.7%) and slowest in NT (-1.4%) and WA (0.7%).

Spending was dominated by the Eastern states – with NSW, VIC and QLD accounting for around 80% of total spending. Sydney, Melbourne and Brisbane accounted for over half (50.1%) of total NAB customer spending.

The fastest growing metro areas in Australia were Hunters Hill NSW (13.2%), Woollahra NSW (9.9%) andMosman Park WA (9.5%). The fastest growing regions were in NSW – Walgett (19.7%), Upper Hunter Shire(16.1%) and Murray (14.4%).

Cities accounted for 64% of all spending and regions 36%. Cities accounted for the biggest share of spendingin all states, particularly Adelaide (78%), Perth (77%), and Melbourne (75%). Spending in Regional areasaccounted for a comparatively bigger share of total state spending in TAS (50%), QLD (55%) and NSW (40%).

By category, spending growth was fastest for Accommodation, Cafes, Pubs & Restaurants (13.5%).

By examining around 4 million daily transactions, they show where spending is growing fastest and in which industry groups. This will help to better inform consumer behaviour and activity. Given the size of NAB’s customer base, they say this data provides a strong indication of national and regional trends.

Business Confidence On The Up

According to the latest NAB Business Survey for January 2017, both business conditions and confidence jumping to much higher levels.

The strength witnessed in last month’s NAB Monthly Business Survey continued into January, with both business conditions and confidence jumping to much higher levels. While these outcomes are certainly pointing to an improvement in the domestic economy after a soft patch through much of H2 2016, a degree of caution should still be exercised given the diverse and rapidly changing seasonal influences at this time of year (which potentially includes the shift in Chinese New Year to January this year).

In terms of the headline numbers, the business conditions index jumped by a solid 6 points in January, to +16 index points, which is around pre-GFC boom levels. This month, another rise in trading conditions contributed to the outcome, but there was also a noticeable jump in employment conditions, which bodes well for the generally underperforming labour market – the employment index hit its highest level since 2011.

Meanwhile, profits were unchanged at solid levels. By industry, last month’s surprise spike in wholesale conditions was unwound (as anticipated), but that seems to have been more than offset at the aggregate level by improvements in personal services, while retail and mining are no longer negative. NSW enjoyed the bulk of the improvement in conditions, while the rest of the mainland states were relatively steady. Cost price measures in the Survey also lifted notably, suggesting a build in wage pressures, although retail price inflation remained very subdued.

Business confidence also jumped in the month, aligning itself with the general enthusiasm seen in financial markets and more positive sentiment towards the global economic outlook. The business confidence index jumped 4 points to +10 index points in January, which was well above the series long-run average. Responses on capital expenditure were also much more encouraging in January, consistent with a rise in capacity utilisation – although forward orders do not point to a continuation of that strength in the near-term.

Recent strength in the NAB Business Survey is consistent with an anticipated rebound in economic activity, following the very weak Q3 2016 National Accounts. With that said, a confluence of seasonal factors suggests it is unwise to get too carried away with the result just yet, especially as key industries like retail remain extremely weak (despite improving in the month), which suggests the outlook for consumption remains cloudy. NAB Economics also have concerns for the longer-term growth picture, as the contribution from LNG exports, temporarily higher commodity prices and the residential construction boom fade, keeping pressure on the labour market.

Nevertheless, in light of the recent flow of data, NAB’s economic forecasts (which include expectations for the RBA’s cash rate) are currently under review – to be published tomorrow.

NAB branches give paper deposit slips ‘the slip’

NAB says paper deposit slips will soon be a relic of the past across all NAB branches.

NAB customers will be spared the tedious effort of having to fill out paper deposit slips for over-the-counter transactions from tomorrow.

Executive General Manager of Retail, Bob Melrose, said paper deposit slips would be removed from NAB’s branches from Saturday 11 February 2017, with withdrawal slips to follow in March.

“We know our customers want banking to be quick and simple, which isn’t always the case when you have to muck around filling out forms,” Mr Melrose said.

“This move means we’ll be collectively saving our customers from completing these details more than six million times each year.

Customers will instead receive a printed receipt which itemises the details of their transaction. Deposit slips will still be available for some transactions such as passbook accounts and bankers will assist anyone who has questions about what this means for them.

“We’re not the first bank to take this step by any means, but we’re committed to making it easier for our customers to do their everyday banking with us.

“We have a dedicated team to identify and fix what frustrates customers the most. We know from feedback that paper deposit slips were a sticking point for many of our customers, and that’s why we are making this change.

“It also brings us in step with the more than 90 per cent of customer transactions which take place digitally,” Mr Melrose said.

Fast facts:

  • Around 12 million deposits are made in NAB branches each year
  • More than 3.2 million – or 27% – of these are currently made with paper deposit slips.
  • Around 8.2 million withdrawals are made in NAB branches each year.

More than 3.7 million – or 47% – of these are made with paper withdrawal slips.

NAB Q1 2017 Trading Update

NAB released their December 2016 trading update today.

It looks like revenue is running a bit below system, expenses are considerably higher, but the quarter was saved by a cut in bad and doubtful debt provisions. Impaired assets rose.

They say that un-audited cash earnings (their preferred measure although not a statutory financial measure, as it is not presented in accordance with accounting standards and excludes discontinued operations and “certain other items”) were about $1.6 billion, which is around 1% lower than the quarterly average of the September 2016 half year and 1% lower than the prior corresponding period.

They say revenue grew around 1%, thanks to higher trading income and growth in lending, whilst group net interest margin was broadly stable. Given mortgage system growth is running circa 6% annually at the moment though, this seems on the low side.

Expenses rose 5%, thanks to EBA, redundancies and project costs, and only partly offset by productivity savings which they say should deliver around $200m. They reduced FTE by 488.

They reduced the charge for bad and doubtful debts by 23% to $164m because the one-off provisions they made in September for mining and agribusiness were not repeated.  However, impaired assets stood at 0.90% in December, up from 0.85% in September. Provision coverage of gross impaired assets rose from 38.3% to 43.0%.

The CET1 ratio was 9.5%, compared with 9.8% in September, reflecting final dividend payouts.  They said they may issues new ASX-listed Subordinated Tier 2 capital security, depending on market conditions.

The group’s leverage ratio was 5.4%  (APRA basis) and LCR was 124%.