NAB targetting A$18bn of clean energy financing

NAB is targetting A$18bn of clean energy financing activities over the seven years to September 2022 to help address climate change and support the orderly transition to a low-carbon economy, according to a release on Friday.

This underscores the growing importance of this sector, and the positioning of major companies across the industry.

National Australia Bank (NAB) would like to congratulate Xinjiang Goldwind Science & Technology Co. Ltd (Goldwind) on its successful bid to purchase the 530MW Stockyard Hill Wind Farm (Stockyard Hill).

Stockyard Hill, located approximately 35km west of Ballarat, Victoria, is slated to be Australia’s largest wind farm by capacity and upon its completion, will provide enough clean energy to power about 340,000 homes.

NAB acted as the sole mandated lead arranger, underwriter and bookrunner for Goldwind’s acquisition financing for Stockyard Hill. This transaction closely follows NAB’s successful collaboration on the financing of Gullen Range Wind Farm, White Rock Wind Farm and Gullen Solar Farm.

NAB Global Head of Clean Energy Andrew Smith said: “Goldwind are one of the world’s largest manufacturers of wind turbines and we are thrilled to have provided our support in this landmark transaction.

“NAB is the leading arranger of project finance in the Australian renewables sector and this transaction reinforces our position according to Project Finance International 2006 (2016 Asia Pacific Initial Mandated Lead Arrangers League tables December 2016) NAB analysis ranking against four major Australian banks – cumulative volumes.

“This transaction will contribute toward our target of undertaking A$18bn of clean energy financing activities over the seven years to September 2022 to help address climate change and support the orderly transition to a low-carbon economy,” he said.

Managing Director of Goldwind Australia, John Titchen said: “Goldwind recognises the key role that NAB played in underwriting the finance of our successful bid to buy the 530MW Stockyard Hill Wind Farm and secure the largest wind farm power purchase agreement in Australia.

“The capability, commitment and professionalism of the NAB team is impressive and the commitment of NAB to the renewable energy sector is very clear.”

NAB to sell its Private Wealth business in Singapore and Hong Kong

NAB has today announced it had entered into an agreement to sell its Private Wealth business in Hong Kong and Singapore to OCBC Bank.

As at the end February 2017, the business to be sold comprised a US$1.7 billion mortgage portfolio and a US$3.05 billion deposit portfolio, with about 11,000 customers across Hong Kong and Singapore. The transaction is expected to complete before the end of 2017 and will not have a material financial impact on NAB.

NAB Executive General Manager for International Branches Peter Coad said the sale simplifies NAB’s Asian business so that it can focus on better serving its business, corporate and institutional customers.

“As Australia’s biggest business bank, NAB is focussed on helping our business customers in Australia and New Zealand access Asian markets, and on connecting Asian-based businesses to opportunities in Australia and New Zealand. The sale of our Private Wealth business, which is largely a retail business for Private Wealth clients in Hong Kong and Singapore, means our banking offer in Asia remains very focused on business, corporate and institutional customers,” Mr Coad said.

OCBC Bank was established in Singapore in 1932. OCBC Bank and its subsidiaries offer a comprehensive range of commercial banking, specialist financial and wealth management services, including consumer, corporate, investment, private and transaction banking, and treasury, insurance asset management and stockbroking services.

 Neil Parekh, NAB General Manager Asia (ex- Greater China) said the transition of customers is expected to complete by the end of the year, and work is underway to support NAB staff through this period of transition.

“We will work closely with OCBC Bank during the transition to completion to ensure a smooth process for customers moving to a business with a comprehensive product offering, as well as supporting our people as we work through impacts and options,” Mr Parekh said.

NAB in proposed LMI tender with US insurer

From Australian Broker.

US mortgage insurance giant Arch Capital Group is ramping up its Australian presence in a bid to win more business in the country’s lenders’ mortgage insurance (LMI) market. Arch already does business with Westpac, who offloads LMI’s loans above 90% LVR to them (with lower LVR loans held by the banks internal LMI division).

The Australian Financial Review reports that Arch is considering a request for proposal by National Australia Bank to provide its LMI. Currently, the bank’s LMI is provided by Genworth Mortgage Insurance Australia for broker-originated loans and QBE Insurance for bank-originated loans.

According to the AFR, the process is still “in the preliminary stages”.

Arch already has a presence in Australia, supporting Westpac’s LMI operations by reinsuring riskier loans, the AFR reported. And now the US giant is said to have been granted a local license and plans to ramp up its business in the country.

There’s one big customer the US company won’t be able to touch for a few years, though. Genworth managed to lock down its relationship with Commonwealth Bank of Australia last year, renewing its contract for a further three years, according to the AFR.

NAB March 2017 Results, A Mixed Bag

NAB has released their 2017 Half results. They reported cash earnings (“cash earnings” is calculated by excluding discontinued operations and certain other items) of $3.29 billion, up 2.3% compared to March 2016 half year.

There are some positives, with stronger contributions from markets and treasury (but of course less easy to replicate next time), net interest margin higher in the business sector, but lower momentum and margins in the home lending sector, rising delinquencies and higher provisions for commercial real estate. Capital ratios are strong, and funding well managed. Benefits from technology investments are flowing.

On a statutory basis, net profit attributable to the owners of NAB was $2.55 billion compared to a loss of $1.74 billion for the March 2016 half year. The improved result primarily reflects reduced losses from discontinued operations. Excluding discontinued operations, statutory net profit decreased 11.4%. The main difference between statutory and cash earnings relates to the effects of fair value and hedge ineffectiveness, and discontinued operations.

Revenue increased 1.8% benefitting from growth in lending, improved fee collection and stronger trading income.

Group net interest margin (NIM) declined 11 basis points but excluding Markets and Treasury was down 4 basis points. Compared to the September 2016 half year NIM was stable at 1.82%.

Expenses rose 0.8% reflecting higher personnel costs including redundancy charges, and increased technology depreciation and amortisation charges, partly offset by productivity savings.

The total charge for Bad and Doubtful Debts (B&DDs) was $394 million, up $19 million or 5.1%. The charge this period includes an increase in collective provision (CP) overlays of $89 million mainly for potential risks relating to the commercial real estate (CRE) portfolio. The Group’s total CP overlays for CRE, agriculture, mining and mining related sectors now stand at $291 million.

The ratio of Group 90+ days past due and gross impaired assets to gross loans and acceptances of 0.85% at 31 March 2017 was stable compared to 30 September 2016.

The Group’s Common Equity Tier 1 (CET1) ratio was 10.1% as at 31 March 2017, an increase of 34 basis points from 30 September 2016. The Group’s CET1 target ratio remains between 8.75% – 9.25%. On an internationally comparable basis3 the CET1 ratio increased 51 basis points from 30 September 2016 to 14.5%.

The interim dividend is 99 cents per share fully franked, unchanged from the 2016 interim and final dividends.

The Group says it maintains a well diversified funding profile and raised $18.8 billion of term wholesale funding in the March 2017 half year across a range of markets. The weighted average term to maturity of the funds raised by the Group over the March 2017 half year was 5.4 years. The net stable funding ratio (NSFR) was 108% at 31 March 2017.

The Group’s leverage ratio as at 31 March 2017 was 5.5% on an APRA basis and 5.9% on an internationally comparable basis.

The Group’s quarterly average liquidity coverage ratio as at 31 March 2017 was 122%.

Business & Private Banking grew cash earnings 2.5% to $1,368 million reflecting sound revenue growth and tight cost management, partly offset by higher B&DD charges. NIM improved and lending growth in specialised businesses such as Health and Agribusiness was strong.

Consumer Banking & Wealth cash earnings were stable at $764 million impacted by higher funding costs, increased competition in home lending, and reduced Wealth income. NIM stabilised compared to the September 2016 half year and more recent home lending market share trends are improving.

Looking at home lending, 42.3% are investor loans, and more than half of these are interest only.

Drawdowns from brokers continued to rise, as did the number of brokers under NAB owned aggregators.

Housing net interest margin fell, as did home lending revenue. They are growing below system.

Delinquencies are rising across the portfolio. They have limited exposure to commercial real estate (but provisions are up), and to higher risk mining post codes.

Card and personal lending delinquencies are also rising.

Corporate & Institutional Banking (CIB) cash earnings rose 17.9% to $791 million. This was a strong result underpinned by a disciplined focus on returns. Over the year to March 2017 CIB delivered revenue growth, lower costs, lower B&DD charges and a $15 billion reduction in risk weighted assets.

NZ Banking local currency cash earnings increased 10.4% to NZ$455 million. Improved economic conditions, and in particular a better outlook for the dairy sector, (provisions down ~90% compared with prior half) have resulted in lower B&DD charges. Strong growth in business and home lending reflect successful expansion in priority segments. NZ net interest margin fell.

NAB Group CEO Andrew Thorburn said:

“The rollout of the Net Promoter Score (NPS) system to all our front line teams is an important tool that helps bankers take greater ownership of the customer experience. Every branch, contact centre and business banking centre now receives localised weekly scores and real time customer feedback resulting in improved customer outcomes on our front line.

“Technology underpins our ability to serve customers better by becoming easier and simpler to deal with. Over the half we have made further progress embedding the Personal Banking Origination Platform (PBOP) into our network. Approximately 55% of customers are now receiving unconditional home loan approval within 5 days compared to 7% at September 2016.

“Disciplines in place to reshape our business, including use of automation and meeting more of our customers’ needs digitally, are delivering efficiency benefits. In 1H17 we achieved $102 million of productivity savings against an annual target of greater than $200 million. We remain confident of achieving positive ‘jaws’ over the full year as a number of initiatives gain further traction during the second half of 2017”.

 

 

NAB Lifted Mortgage Rates Again

From Australian Broker.

National Australia Bank (NAB) has announced further changes for residential investor and owner-occupier borrowers, effective from last Friday (7 April).

 

The rate for NAB’s 1 Year Package Fixed Rate for Residential Investment Home Loan changed to 4.29% p.a. for principal and interest repayments.

For the 1 Year Package Fixed Rate for Interest Only Residential Investment Home Loan, rates changed to 4.39% p.a.

Finally, fixed rates for all other interest only owner occupier and interest only residential investment loans increased by 0.10% p.a.

“We are operating within a dynamic financial, economic and regulatory environment, and it’s important that we regularly review our pricing and policy measures across all of our home loan products to ensure we continue to lend responsibly,” a spokesperson from NAB told Australian Broker.

“NAB continues to offer competitive home loan rates to customers. The changes made to our fixed rates on Friday 7 April 2017 apply to new loan accounts only.”

 

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.