In a profit announcement on the ASX, NAB chief executive Andrew Thorburn said while costs were well contained and asset quality continued to improve across the overall business, NAB’s UK operations continue to face several challenges.
Mr Thorburn said that although conduct charges are difficult to predict, the bank expects it will need to take “further provisions at the full-year result for both interest rate hedging products and payment protection insurance”.
NAB said it expects an additional provision of at least £75 million will be required at the full-year result in “relation to increased costs of administering the payment protection insurance remediation program”.
The bank also expects to outlay an additional provision of £170 million at the full-year result in relation to interest rate hedging products.
NAB said there remains a “wide range of uncertain factors relevant to determining the total costs associated with conduct-related matters”.
Mr Thorburn also said that if Scotland were to vote in favour of independence on 18 September, this could result in significant additional costs and risks for NAB’s UK operations.
“We continue to closely monitor the situation and have appropriate contingency planning in place,” said Mr Thorburn. “Like all large businesses, there are things we can do better at NAB and we will have more to say on this at our full-year result on 30 October.”
The results did, however, show an increase in local currency cash earnings in the past quarter for NZ banking, following higher revenue from increased loan volumes and lower funding costs.
Cash earnings were also up for the wealth arm of NAB, with profits benefiting from improved insurance claims results while lapses remained stable.
The bank added that the “impact of higher funds under management was offset by a mix change to lower margin wholesale investment business in the period”.
