NAB flags extra A$749m provision for customer refunds

Sydney

NATIONAL Australia Bank Ltd (NAB), the country's fourth-largest, on Thursday flagged an additional A$749 million (S$727 million) in charges to refund thousands of wronged customers and said it would review its dividend policy.

Melbourne-based NAB said it has now put aside A$1.1 billion to compensate customers as it speeds up efforts to regain public trust after a damaging misconduct inquiry in the sector. The inquiry has put banks and investment firms under pressure to clean up processes that led to customers being automatically billed for wealth management advice they did not receive.

NAB was singled out by the inquiry for an apparent unwillingness by its executives to accept responsibility for past wrongs, which resulted in the resignation of its CEO and chairman. NAB's extra provisions will result in a A$325 million hit to cash earnings for the first half of this year, which the lender is due to release on May 2.

About 91 per cent of the new provisions were related to its wealth management division such as non-compliant financial advice and incorrectly-charted fees, with the balance related to banking matters. The new charges included an assumption it would have to refund 31 per cent of service fees charged by employed advisers, and the costs of reviewing service fees provided by its much larger self-employed adviser network.

The provisions excluded, however, any customer refunds that might be necessary to refund customers of self-employed advisers, the bank said.

Credit Suisse analyst said that applying the same fee refund rate meant the bank might have to account for another A$200 million to A$300 million in refunds.

The Australian Securities and Investments Commission in March rebuked the banks for delays in fixing internal systems that resulted in customers paying fees for services they had not received. On Thursday, the regulator said a former NAB adviser had been charged with criminal offences for "obtaining a financial advantage by deception". REUTERS