The more we look … the more we see what really matters Annual Review 2014




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Chairman’s and CEO’s messages

Chairman’s message – Michael Chaney


Our operations in Australia and New Zealand performed well in what was at times a challenging environment. We reported additional provisions for conduct-related charges and impairments which reduced our full year earnings.

The 2014 year was one of mixed fortunes for your Company. On the one hand our operations in Australia and New Zealand performed well in what was at times a challenging environment.

On the other hand we were required to report additional provisions for conduct-related charges and impairments in the United Kingdom which, combined with the write down of some capitalised computer software and taxation benefits, reduced our full year earnings.

Cash earnings were $5.18b, compared with $5.75b last year and statutory net profit attributable to the owners of the Company was $5.3b.

The Board declared a final dividend of 99 cents per share, fully franked, which represented a 2.1% increase on the 2013 final dividend.

The increase in the UK conduct provisions followed a number of new developments in relation to payment protection insurance and interest rate hedging products. These include the run rate of new complaints, the implementation (in consultation with the UK regulator) of a new complaints handling process and the need to re-examine records dating back to pre-2000 periods, which are likely to result in increased payments for both new and closed complaints. While this is an issue facing all UK banks, it is a disappointing outcome.

On the positive side, in Australia, our Personal Bank has continued to perform strongly and we remain the leading Business Bank by business lending market share.

The NAB Wealth business produced increased profits in 2014 following a difficult year in 2013. Returns in this business are still below acceptable levels and we continue to investigate ways of improving them.

Our New Zealand subsidiary, BNZ, again produced increased profits, consistent with its solid, reliable performance over many years.

The UK operations also produced an increase in underlying earnings in an improved economy. We achieved a significant reduction in the UK Commercial Real Estate portfolio during the year through repayments and the sale of a lower quality portion of the book.

Portfolio management remains a strong area of focus. We continue to look for opportunities to dispose of our UK bank and the improved market conditions in the UK may make this more feasible. In late October we proceeded with the public listing of our US bank. The initial public offer involved the disposal of 31.8% of Great Western Bank and we anticipate selling the remainder as market conditions permit.

NAB’s Executive Leadership Team has undergone significant change this year. Craig Drummond replaced Mark Joiner as Chief Financial Officer. We thank Mark for his solid contribution to the Group, in particular his efforts to ensure that NAB maintained its financial strength. In August we farewelled Cameron Clyne and welcomed Andrew Thorburn as Group Chief Executive Officer, and Andrew has assembled a new Executive Leadership Team.

On behalf of the Board, I thank Cameron for his leadership as CEO over the last five and a half years. He took on the role during the global financial crisis and steered the bank successfully through that challenging time. Cameron’s focus on the fundamentals – revitalising the Personal Bank through its ‘Break-up’ campaign, rebuilding our core IT systems and dealing with various legacy issues – position us well for the future.

The close of the year also saw the departure of three senior executives: Joseph Healy, Lisa Gray and Bruce Munro. We thank each of them for the significant contribution they made to NAB.

Andrew Thorburn demonstrated outstanding performance as CEO of BNZ. He is a seasoned banker and the Board is confident that he has the experience, energy and vision to lead NAB to an era of strong performance.

The performance of the global economy over the last year has been disappointing, with 2015 likely to be another year of below-trend growth and large variations between economies and regions.

Growth is likely to be reasonable in the US and UK, but the outlook in Europe is more concerning. Australia continues to be heavily reliant on the growth in China’s economy, which is slowing but still above 7%. While Australian exports will contribute to reasonable growth in GDP (around 3%), a still hesitant consumer and wary business sector seems likely to underpin a relatively weak domestic demand and credit outlook.

In this environment, NAB has had a strong focus on strengthening its capital, funding and liquidity positions. The Group’s Common Equity Tier 1 ratio was 8.63% at year end, an increase of 20 basis points over the year. Our balance sheet strength leaves us well placed to meet regulatory changes and respond to future challenges. The Financial System Inquiry final report is due before the end of the calendar year and NAB will monitor its recommendations, including any impact on further capital requirements.

NAB takes its position within the economy and broader society very seriously. We will continue to play an important role in lending and investing in the small and large businesses, industries, infrastructure projects and not-for-profit organisations that help our communities to prosper.

Through our community investment program, we will continue to address social issues such as financial exclusion.

In December 2014 John Thorn and Geoff Tomlinson will retire from the Board after serving 11 and 14 years respectively. Both directors have made a major contribution to NAB, John as Chairman of the Audit Committee and Geoff as Chairman of the key wealth companies. We wish them both well. During the 2014 calendar year we welcomed David Armstrong, Peeyush Gupta and Geraldine McBride to the Board. Together, they bring a wealth of experience and diversity of skills.

Our 42,000+ employees are key to our success and we seek to ensure they are engaged and productive. On behalf of the Board, I thank them for their hard work and diligence in upholding our standards of responsibility and ethical conduct and maintaining their focus on customers.



this is a picture of the signature of michael chaney, nab chairman

Michael Chaney, Chairman


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