NAB flags $130m higher costs and apologises to staff after ‘disappointing’ payroll bungle
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More news: NAB shares rallied after the major lender recorded stronger-than-anticipated revenue for the third quarter.
Shares were up 1.7% to $39.85 at 12:20pm AEST, taking annual returns to 9.2%.
UBS analyst John Storey said the result showed "solid revenue and volume growth trends", offset by higher-than-expected cost guidance and bad debts.
Volume growth of 5% topped consensus estimates of 4%, he said, but updated full-year cost guidance of 4.5% is now above average forecasts of 3.9%.
NAB's update also revealed higher-than-expected credit impairment charges of $254 million. Storey said this translated to about 13 basis points on an annualised basis, compared to second-half forecasts of 12 basis points.
NAB flags $130m higher costs and apologises to staff after ‘disappointing’ payroll bungle
More news: NAB says it will have to pay at least $130 million to review and remediate payroll issues as it flagged expenses growth of 4.5% for FY25.
What they said: In a statement to the ASX, NAB said it had identified further problems with its payroll after it transitioned to its 2024 Enterprise Agreement.
"Paying our colleagues correctly is an absolute priority. We are sorry and apologise to our colleagues that this has happened and have commenced remediating those impacted," NAB people and culture group executive Sarah White said.
CEO Andrew Irvine said the issue was "disappointing and must be fixed", and acknowledged it had undermined the bank's productivity push and cost cutting measures in other parts of the business.
The bank has engaged the Fair Work Ombudsman and the Financial Services Union (FSU) over the systematic error.
The context: NAB had previously disclosed costs of $250 million between FY20-FY22 after a 2019 payroll review.
NAB third-quarter cash profit falls to $1.77b with higher payroll and tech costs
The news: NAB made a $1.77 billion cash profit in the third quarter, down 1% on last year according to its trading update on Monday.
The numbers: The bank made a $1.66 billion statutory net profit (unaudited), in line with the quarterly average recorded in the first half.
Expenses grew by 3% largely reflecting the bank's growing payroll and tech investment.
Net interest margins grew 8 basis points, with growth attributed to replicating portfolios and lower short term funding costs.
Business lending grew by 4% with NAB hitting a record business lending balance of $4.6 billion in the quarter. Home lending grew 2% in line with the broader market while deposits remained stable.
The bank's group common equity tier 1 ratio sat at 12.14% at the end of the quarter. It recorded a credit impairment charge of $254 million for the quarter, largely attributed to its business lending portfolio.
The context: It makes NAB the third bank to disclose recent performance, with CBA reporting its full year result and Westpac sharing its own third quarter update last week.
"Execution of NAB’s strategy and focus on our key priorities has supported a 2% lift in underlying profit this quarter," NAB CEO Andrew Irvine said.
"We remain optimistic about the outlook and are well placed to manage NAB for the long term and deliver sustainable growth and returns for shareholders."
The source: ASX Release
