NAB has reported subdued Q1 profits and pushed out the sale of MLC Wealth due to a “challenging” business environment.
The bank’s Q1 update saw cash earnings grow a sluggish 1 per cent as the bank deals with the low rate environment and subdued lending growth.
“Twelve months on from the conclusion of the royal commission, we remain focused on building confidence and trust in our bank by addressing legacy issues where customers were treated poorly,” said CEO Ross McEwan.
“Customer-related remediation programs and regulatory compliance investigations (including associated enforcement actions and class actions) are continuing, with potential for additional charges although amounts and timing remain uncertain.”
Those additional charges could refer to a potential AUSTRAC enforcement that the bank has warned could be coming down the pipeline, though a spokesperson told Investor Daily that they are “not of the scale that have been reported in other organisations”.
NAB also indicated that the sale of MLC Wealth could be deferred “beyond FY2020” while the bank seeks to complete customer remediation, and that while they are targeting a public market exit, they will also explore “alternative transaction structures and options”.
“NAB will take a disciplined approach to the exit of MLC Wealth and will execute a transaction at the appropriate time having regard for the interests of all stakeholders,” the bank said in its Q1 Trading Update.
“Work on operational separation has progressed well but the business environment remains challenging.”
NAB was gearing up to sell the business in 2019 until the release of the royal commission final report forced the resignation of its CEO and chairman. That – coupled with a low interest rate environment and remediation payouts that significantly impacted the bank’s profitability – saw the sale pushed out until 2020.
“We need to make sure that we’re sufficiently well advanced on that remediation so that we’re not handing on a legacy liability to the new shareholders,” acting CEO Philip Chronican said in 2019.
“Secondly, we need to complete the functional separation of the business and make sure it’s on a healthy footing… Then thirdly, the market environment has to be right for whatever the sale mechanism is.”
However, with another fees-for-no-service scandal hitting late last year, it’s unclear when the MLC sale will go ahead.