Annual Review 2015




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Our business – National Australia Bank


We are a financial services organisation with more than: 12 million customers, 1,500 branches and business banking centres10, 560,000 shareholders and 40,00011 people. Our aim is to achieve our objective of delivering superior returns to our shareholders through execution of our strategy.

Our vision: To be and New Zealand’s most respected bank.

Cash earnings12

A$ (million)

Australian Banking

$5,111

NZ Banking

$762

NAB Wealth

$464

UK Banking

$307

Corporate Functions and Other13

($630)

Our portfolio


The majority of our financial service businesses operate in Australia and New Zealand, with other businesses located in Asia, the UK and the US14. Our portfolio includes:

Australian Banking


In Australia, we provide a comprehensive range of products and services to all customer segments.

Our Business Banking division provides products and services to customers ranging from micro, small and medium sized businesses to large global institutions. We are a leader in providing banking services to Australian businesses, with specialist expertise in Agribusiness, health, government, education and community banking requirements.

Our Personal Banking products can be accessed through various channels, including NAB, NAB Broker, nabtrade and UBank.

Australian Banking also includes Fixed Income, Currencies and Commodities (FICC), Capital Financing, Asset Servicing, Treasury and the results of our international branches. NAB currently has branches in Hong Kong, Beijing, Shanghai, Singapore, Tokyo, Osaka, Mumbai, London and New York as well as representative offices in Jakarta and Hanoi.

Our international branches support Australian and New Zealand businesses overseas and also serve our international customers who wish to do business in Australia and New Zealand.

NZ Banking


NZ Banking operates under the Bank of New Zealand (BNZ) brand. BNZ offers services in retail, business, corporate, agribusiness and insurance. BNZ’s market operations form part of Australian Banking.

NAB Wealth


NAB Wealth provides superannuation, investment and insurance solutions to retail, corporate and institutional clients. It operates one of the largest networks of financial advisers in Australia under brands that include MLC, JBWere, JANA and Plum.

In October 2015, consistent with our commitments to improve the returns from NAB Wealth and continue to provide wealth solutions for our customers, we announced an agreement to sell 80% of NAB Wealth’s life insurance business to Nippon Life Insurance Company.


UK Banking


UK Banking operates under the Clydesdale and Yorkshire Bank brands and offers a range of banking services for both personal and business customers. These services are delivered through a network of retail branches, business and private banking centres, direct banking and broker channels. We are committed to fully divesting our Clydesdale Bank and Yorkshire Bank operations, through a demerger and IPO by February 2016.

How we create value


The primary role of our business is to facilitate the movement of capital and flow of money to meet the needs of our stakeholders. It is through the alignment of these needs that we can enable a thriving society and create long-term value. How NAB creates value can be understood in a number of ways, the primary one being through the various business activities that we engage in. This is explained in more detail in the table below. We continue to champion Shared Value15 as a framework to leverage our strengths and create shareholder value by addressing social and environmental challenges.

Related financial impact

Business
Activity


Broader impacts of our
business activities


Risks arising
from activity16


Interest income

We lend money to our customers.

This creates assets from which we derive interest income over time.



Lending makes it possible for NAB’s customers to acquire the assets they need to create their own wealth. Lending also makes it possible for NAB’s business banking customers to manage working capital and cash flow requirements which support their commercial growth and sustainability. Our responsible lending practices target suitability of products for our customers and help us to manage the exposure to ESG issues that arise through our lending portfolio.

Credit

Balance sheet and liquidity

Regulatory

Compliance

Operational


Interest expense

We obtain funding from deposits placed by our customers to enable lending. We also access a diverse range of wholesale funding. This creates liabilities on which we incur interest expense.

Customer deposits earn interest at rates dependent on the type of product and the size of the deposit. NAB’s participation across senior, subordinated and secured debt markets contributes to the stability and liquidity of the broader financial system. We also work closely with regulators to protect depositor funds and reduce risk in the Australian banking system.

Balance sheet and liquidity

Regulatory

Compliance

Operational



Net life insurance

income


We offer superannuation, investment and insurance to retail, corporate and institutional customers and earn fee, administration and premium income.

Through superannuation solutions, retirement and insurance products, and general investment advice we help our customers and their dependents grow and protect their wealth. We develop investment options, like ‘green’ or social bonds, that give our customers the opportunity to pursue positive financial returns, along with social and environmental outcomes.

Life insurance

Regulatory

Defined benefit pension


Fees and commissions

We also provide transactional banking facilities to our customers and earn fee and commission income.

NAB’s transactional banking solutions help our customers manage their cash and make payments efficiently and securely. By making banking simpler for our customers and reducing the time and cost involved in moving money, our customers can focus on running their businesses, achieving their financial goals and contributing to their local communities.

Credit

Regulatory

Compliance

Operational



Trading income

We offer risk mitigation products that enable financial protection and diversification through risk transfer. Risks are either transferred to counterparties or retained by NAB. Our traded markets include foreign exchange, commodities, interest rate, credit and equity instruments.

NAB supports its customers’ needs by assisting them in dealing with market fluctuations and volatilities. By offering risk mitigation products, we make it possible for customers to manage their exposure to unexpected gains or losses and continue to contribute to the growth and stability in local businesses and communities.

Credit

Traded market

Regulatory


Personnel expenses

We invest in attracting and developing great people so we can create a customer-focused, diverse and inclusive workforce that enables execution of our strategy.

NAB employs over 40,000 people17 and our remuneration framework rewards employees for meeting key objectives and aligning decisions to our values. Employee share ownership helps our people create wealth and aligns their interests to NAB’s long-term success. Our investment in a diverse and inclusive workforce seeks to reduce inequality and includes programs to provide employment pathways to marginalised individuals.

Strategic

Compliance

Operational


Other expenses

We invest in our business operations, including technology and digital capability, to deliver great products, services and support to our customers. We also invest in our communities and our physical locations.

To remain competitive and positively contribute to the community, we continue to invest in our business operations. Investing in improvements to our hardship function’s operations has led to an increase of proactive requests for assistance and has reduced overall loan defaults. Our community investment focuses on building financial inclusion, facilitating economic engagement and improving environmental outcomes. The majority of our major locations now meet or exceed best practice environmental benchmarks.

Strategic

Compliance

Operational


Tax expense

Net profit

Dividends


Our business operations result in the payment of taxes to governments and dividends to our shareholders.

NAB makes a valuable contribution to the development and growth of the economies in which we operate, both through the taxes we pay and the taxes paid by our employees and suppliers. By optimising our business success, we can also increase the value we are able to deliver to our shareholders and encourage long-term wealth creation.

Regulatory

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