National Australia Bank is spinning off its financial advice and superannuation businesses in a move it says has nothing to do with the “shameful” industry scandals heard by the royal commission.
NAB, which on Thursday reported a 16 per cent fall in first-half profit, said it was considering options including a demerger and initial public offering for the businesses, which operate under the MLC brand and others.
Chief executive Andrew Thorburn said the decision had been unrelated to the royal commission, which has flagged the possibility of forced asset sales after hearing of providers charging for and then failing to provide advice.
“There’s a lot of buffeting at the moment and I don’t think we entirely have perspective, so we would not make a decision that’s this major based on a couple of weeks of evidence at the royal commission,” Mr Thorburn said.
“Respecting the royal commission’s importance, I think this is much, much bigger.”
Mr Thorburn said the move, which should be completed by the end of the 2019 calendar year, was being considered prior to the airing of the “fees for no service” scandal that has rival Commonwealth Bank on the back foot and forced the resignation of AMP’s CEO and chair
NAB has already spun off its loss-making Clydesdale Bank and sold 80 per cent of its life insurance unit over the past two years.
“This is a major decision for the bank and we would not make it on the basis of some noise and some shameful things that have happened,” Mr Thorburn said.
The CEO said bonuses for selling products and poor character were to blame for misconduct in the financial services industry, rather than the big banks’ ownership of those services.
It’s not about vertical integration – we’ve had poor advice from people who just do advice – but it’s often about the character and conduct of people.”
NABb has owned MLC since 2000 and will continue to operate its JBWere business servicing high-earning clients.
The bank’s cash profit for the six months to March 31 dropped to $2.76 billion after expenses jumped 25.3 per cent, largely due to the cost of the ongoing restructure announced last year.
Redundancy costs rose with about 1050 full-time employees having left as NAB chases its target of 6000 cuts by 2020.
Cash profit was flat at $3.29 billion once $750 million of restructuring costs were stripped out for what NAB called a solid underlying result.
Net operating income rose 2.5 per cent to $9.09 billion and net interest margin – a key measure of profitability – slipped 0.04 percentage points over the half but was up 0.03 percentage points on the prior corresponding period.
At 10.48am, NAB shares were down 36 cents, or 1.2 per cent, at $29.22.
Key figures from NAB’s half year results
- Cash profit down 16.2pct to $2.759b
- Cash profit excluding restructuring costs down 0.2pct to $3.289b
- Net profit up 1.5pct to $2.583b
- Net operating income rose 2.5pct to $9.093b
- Interim dividend flat at 99 cents, fully franked