“Work on operational separation has progressed well but the business environment remains challenging. This may defer exit beyond FY20,” NAB said.
It is the second delay in a plan to offload the wealth business after NAB last February said that its plan to demerge MLC had been pushed back until 2020. It comes as wealth managers are grappling with heavy compensation costs, intense scrutiny from regulators, and a suite of new laws in response to the banking royal commission.
The update released on Thursday also showed NAB’s unaudited cash profit rose 1 per cent in the three months to December to $1.65 billion, helped by a “slightly higher” net interest margin and lower charges for bad loans.
NAB’s net interest margin, which compares the cost of funding with what the bank charges for loans, benefited from the industry-wide move to not pass on last year’s official interest rate cuts in full to borrowers.
Charges for impaired loans fell 25 per cent to $185 million, a two-year low, while the proportion of customers falling behind on loans edged up 1 basis point, to 0.94 per cent.
New chief executive Ross McEwan said the bank showed was a “sound” performance as one of NAB’s top priorities was to grow “safely” against a backdrop of very low interest rates. NAB removed 32 fees in the December quarter and Mr McEwan said he was focused on simplifying the bank by cutting the number of products and rationalising its technology systems.
“Twelve months on from the conclusion of the royal commission, we remain focussed on building confidence and trust in our bank by addressing legacy issues where customers were treated poorly,” Mr McEwan said.
Mr McEwan, a former chief of the Royal Bank of Scotland, said the lender was continuing to compensate customers, while also carrying out “regulatory compliance investigations” linked to class actions and legal action by the watchdog. He flagged the potential for “additional charges” as a result, but said the amounts of money involved were uncertain.
Mr McEwan has been leading a review of the bank’s strategy since he took the reins in December, and he has said he would have a “very strong” look at lender’s costs.
“Work is underway to refresh our strategy and build a plan for the next five to ten years, defining our ambition and being clear on the bank we want to be: one that gets the basics right, delivers for customers, is safe and secure and has the culture we need for NAB to be a leading bank again,” Mr McEwan said.
Clancy Yeates is a business reporter.