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

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CEO’s message – Andrew Thorburn

We have a committed, passionate and skilled workforce and an excellent customer base but we know that we need to remove customer pain points, make it easier for people to do business with us and apply more of a performance edge to our culture.

Our focus for 2015:

Maintain a strong Australian and NZ franchise by:

Improving customer experience

Focusing on our most attractive customer segments

Building a culture of accountability, performance and delivery

Balance sheet strength, risk and technology

Run off low returning assets

I am proud to have the opportunity to lead a respected and competitive company like NAB, with a sound core franchise in Australia and New Zealand.

I have spent the first few months of my appointment as CEO speaking to our customers, employees and shareholders to understand their needs and concerns. And their reaction has been similar. Our Australian and New Zealand business is in good shape but there is much more we can do to lift our performance and bring a sharper focus to delivering for our customers and our shareholders.

While our headline result for 2014 was disappointing, we’re seeing improved performance in a number of areas and we have outlined a plan to focus our efforts and investments to deliver stronger and more sustainable returns for shareholders.

Throughout my banking career I have seen that employees are key to delivering results. We are focused on building a culture that encourages people to be accountable and to deliver – and where leadership is demonstrated at every level of the organisation. We have a committed, passionate and skilled workforce and an excellent customer base, but we know that we need to remove customer pain points, make it easier for people to do business with us and apply more of a performance edge to our culture.

In Australia, our operating model is allowing us to focus more on our customers and developing the right products and services to help them achieve their financial goals. We have greater accountability and collaboration across our organisation which is driving simpler, more effective processes and outcomes.

In driving greater accountability it was important to get the right team in place. In August 2014, I announced changes to our Executive Leadership Team, each member having strong banking experience, collaboration and a track record for getting things done. I would like to welcome Angela Mentis, Antony Cahill, David Gall, Renée Roberts and Anthony Healy and I have every confidence in their ability to deliver and execute for NAB.

On 9 October 2014 we announced impairments and write downs in relation to UK conduct, capitalised software, deferred tax assets and R&D tax policy changes, totalling $1.5b after tax for the 2014 year. As a result, our full year result showed that cash earnings were down almost 10%, which is not an acceptable result.

Within the Australian Banking business I am pleased with the ongoing momentum in Personal Banking and the more stable performance from Business Banking in the second half of the year.

In Business Banking we will invest more in segments where we have competitive advantage, capability and the returns are attractive. NAB Wealth earnings increased 13.4% on the September 2013 full year off the back of strong growth in investment earnings and an increase in insurance earnings.

At the same time, we will accelerate the run off of our low returning assets and will examine a broader range of options, including those provided by public markets, to accelerate our exit from UK Banking.

Consistent with this strategy, we have sold 31.8% of US-based subsidiary Great Western Bank and have plans to sell 100% over time, subject to market conditions. As a result of our continued focus on the run off of our UK Commercial Real Estate portfolio, NAB also agreed to sell a £625m parcel of largely non-performing loans in July 2014.

At NAB we believe we have a responsibility to the wider community. As well as our support for business, we also reached other milestones in 2014. In our microfinance program, we wrote our 100,000th loan for customers on low incomes – an important step in helping many people get access to finance for the first time. We were pleased to launch a similar program in New Zealand through BNZ.

We also opened The Village in Melbourne, a place for our small business and community customers to connect and generate ideas. Our employees thrive on actively helping our customers and communities, and this year NAB committed to deliver one million hours through our employee volunteering program by 2018, equating to $50m in value.

Thank you for investing in our Company. I acknowledge that our financial performance this year has not been good enough and the need for us to deliver better returns for our shareholders. We will continue to prioritise meeting our customers’ needs, refocusing our investments and executing better.

this is a picture of the signature of andrew thorburn, nab group ceo

Andrew Thorburn, NAB Group CEO

Our business – National Australia Bank

We aim to deliver sustainable, satisfactory returns to shareholders, and value to our customers, our people and the community. By being focused on what matters most, we’ve now grown to support more than 12.7m customers, 1700 stores and business banking centres7 and 520,000 shareholders.

About us

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 US. Our brands share a commitment to provide customers with quality products and services with fair fees and charges. Our relationships are based on the principles of help, guidance and advice to achieve better financial outcomes for our customers. Our portfolio includes:

Australian Banking

Australian Banking, including Personal Banking and Business Banking, offers a range of banking products and services to retail and business customers, ranging from small and medium enterprises through to Australia’s largest institutions.

Our personal banking products can be accessed through various channels including NAB, nab Broker, nabtrade and UBank.

Our business banking products cater to customers’ needs with specialist expertise in agribusiness, property, health, government, education and community. Australian Banking also comprises Fixed Income, Currencies and Commodities (FICC), Specialised Finance, Debt Markets, Asset Servicing and Treasury.

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 which include MLC, JBWere, JANA and Plum.

NZ Banking

NZ Banking comprises the Retail, Business, Corporate and Insurance franchises in New Zealand, operating under the Bank of New Zealand (BNZ) brand. It excludes BNZ’s market operations, which form part of Australian Banking.

UK Banking

UK Banking operates under the Clydesdale and Yorkshire Bank brands offering 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-based channels.

Our Australian operating model

More focus on customers

In Australia, NAB has now fully implemented a more integrated and simplified operating model that aligns the bank to the external environment and evolving customer needs. The model features:

More streamlined customer management divisions focused on managing and growing customer relationships.

A single product house to effectively coordinate and manage all product offerings and drive innovation.

A centralised operations, shared services and transformation division to drive greater scale and efficiency and delivery of enterprise-wide transformation.

Centralised support divisions, bringing together Risk, Finance and Strategy, People, Communications and Governance, to remove duplication and promote greater consistency.

Our economic contribution

We contribute to the economy through dividends to shareholders, direct community investment, purchasing products and services and payment of salaries and taxes. NAB Group invested $67.6m into the community in the past year, and provided the equivalent of $10.3m through volunteering days.

In NAB’s financial year, we also paid $2.69b in income and employer related taxes globally. On a global basis, NAB also generated other tax contributions totalling more than $0.74b. In addition, NAB indirectly contributed $2.11b in GST/VAT and withholding taxes, collected on behalf of and paid to revenue authorities.

Economic value generated8


Revenues9 ($m)


Economic value distributed8


Operating costs10 ($m)


Payments to employees11 ($m)


Payments to providers of funding & capital12 ($m)


Payments to government13 ($m)


Community investment (Group) ($m)


Total volunteer days (Group)


Economic conditions14

The performance of the global economy has been disappointing, with the remainder of this calendar year likely to have output expansion that is below trend and large variations between economies and regions. Global growth looks likely to remain around 3% this calendar year, before rising to a near trend 3.5% in the following two years.

The below-trend growth experienced between 2012 and 2014 has had important consequences for key elements of the business environment in NAB Group markets. In Australia, although economic growth is running at around trend, there are disparate conditions between regions and industries. The commodity boom that underpinned a large share of output expansion in recent years is moving from its labour intensive investment phase to a period where export volumes come on stream from this increased mineral and energy producing capacity.

As a result, increased volumes of resource exports account for a large proportion of the 3% to 3.25% growth in GDP expected between 2014 and 2016. One consequence of the growth concentration on mining is that the rest of the economy is growing well below its long-term rate. Consequently large parts of the Australian economy will continue to face a low growth environment.

Economic growth in New Zealand is expected to reach a solid 3.8% this calendar year, well above estimates of its long-run potential. Although a combination of sharply falling export prices in the key dairy industry and the impact of policy tightening on the housing market is now clearly slowing the pace of expansion, recent business and consumer surveys readings are still consistent with an above average trend pace of expansion and growth which should still reach 3.4% next calendar year.

In the first half of 2013, the UK economy commenced a sustained and long awaited recovery from the severe 2008/2009 recession and this upturn has gathered momentum through the subsequent period of almost two years, with the annualised pace of growth reaching 3.2% in the first three-quarters of 2014. The UK economic upturn looks set to continue, with growth of around 3% in calendar year 2014 and 2.5% in 2015.

Understanding the broader issues

We reach out to our stakeholders to understand the broader issues affecting our business now and into the future and to inform our reporting. This year the key environmental, social and governance issues identified through our 2014 Annual Materiality Review were:

Ethics and business conduct

Transparency and disclosure

Customer service and satisfaction

Performance and reward management

Staff turnover

Customer financial hardship

Values-aligned culture

››› You can read more about how we identify these issues on page 43 (refer to ‘Making sure we listen’ section).

NAB facts:

12.7m+ Customers

520,000+ Shareholders

42,000+ Employees

1700+ Stores and business banking centres15

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