The CEO of NAB has said that banks will be less profitable as they struggle to deal with the legacy of the royal commission and the COVID-19 shock.
NAB CEO Ross McEwan said that the royal commission was a wake-up call for Australia’s banks and that were “some basic things (NAB) just did not get right”.
“The [royal commission] showed that the banking industry was not delivering in many, many areas that it should have been to its customer base and to the greater population of Australia,” Mr McEwan told a Bloomberg webinar. “It did need to rebuild the trust that had been lost throughout the findings of the [royal commission].”
But Mr McEwan believes COVID-19 crisis has been an opportunity for Australia’s banking sector to turn its reputation around as it provides unprecedented support to customers and business through mortgage and loan deferrals.
“I think it has become a lot stronger and you’re seeing the way the banks have all worked together with the industry association and the regulators and the government to make sure that we’re in the best shape that we possibly can be and to put the customers at the forefront of everything that we do,” Mr McEwan said.
However, as banks struggle through the COVID-19 crisis and continue to deal with the aftermath of the royal commission, shareholders might suffer.
“In the short to medium-term it’s quite clear that there will be a less profitable banking sector here in Australia… in the long-term it’s a very strong economy here in Australia,” Mr McEwan said.
Mr McEwan was promoted to the role of group CEO shortly before the COVID-19 crisis, and has faced the challenge of reforming the bank while also dealing with the unprecedented economic shock. But despite the difficulties created by COVID-19, Mr McEwan sees [an] opportunity for banks as the crisis speeds many structural changes already taking place, including the move to a digital economy.
“In the last 14 weeks, the use of cash has dropped off dramatically,” Mr McEwan said. “The use of cheques has dropped off dramatically. The use of ATMs has dropped off. These trends would have taken probably another five to 10 years to emerge, and all of a sudden people don’t want to touch cash, so the cash usage is down 25-30 per cent.
“We’re looking at saying, what can we accelerate? What are the parts of the strategy that we bring forward to the next 12 months, not the next 36 months? And how can we shape the business to do a better job with customers using a lot more technology and our very good relationships that we have with our customers?”