NAB’s decision to distance itself from MLC and reduce its product offerings stems from a greater acceptance by the group’s leaders that the bank got things very wrong.
Addressing shareholders at the major bank’s annual general meeting (AGM) in Melbourne on Wednesday, NAB chief executive Andrew Thorburn outlined four reasons why he believes the bank has “drifted”.
“Firstly, the primary focus shifted away from customers,” Mr Thorburn said. “This has left our industry open to the challenge of putting profits before people. Ultimately, the interests of our shareholders are aligned with the interests of our customers. This is how a sustainable business is built.”
Secondly, the NAB boss noted how the group had moved from a long-term view to a short-term one.
“Given the risks and nature of our business, we should be planning over a five to 10-year horizon, not just one to two years,” he said.
“Thirdly, the move from base pay to greater incentive compensation hasn’t been managed carefully enough, and has, at times, rewarded the wrong behaviours, and focused on product sales and short-term growth. We have taken actions in this area, and will continue to make changes.”
Finally, Mr Thorburn said banks have become bound by internal rules, policies, regulation and legacy systems that have led to inertia.
“As a result we lost the local connections we previously had,” he said.
Like its big four peer ANZ, NAB is undergoing a transformation process to become a simpler bank. Mr Thorburn said the company will invest $4.5 billion over three years to make NAB “simpler and faster, less bureaucratic, with more efficient and reliable systems so we are able to deliver a better experience to our customers”.
“To reduce compliance, complexity and cost, we have reduced the number of products we offer. We are migrating to new technologies, including cloud, to deliver greater speed and resilience at a lower cost. In total, we are on track to achieve $1 billion in cost savings by 2020,” he noted.
“We aim, by the end of calendar year 2019, to separate MLC Wealth – to enable us to focus on a simpler wealth offering through nabtrade and JBWere. This has been assisted greatly by the appointment of Geoff Lloyd as CEO of MLC in September.”
Divesting its wealth business and reducing its product range aren't the only measures NAB is taking to correct its ways. Significant leadership changes were made at the bank in 2018, including the departure of former MLC executive Andrew Hagger in early October.
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