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




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Challenges and opportunities

Making the most of our challenges and opportunities


Facing our challenges and asking what opportunities they present, helps focus our strategy and make decisions to respond in the short, medium and long term.

The financial services industry is operating in an increasingly competitive environment, while facing regulatory change, as well as adapting to an evolving digital landscape. We remain focused on our Australian and New Zealand franchises, while actively managing the performance of our non-core businesses.



Our challenges and opportunities

How we’re making the most
of our challenges and opportunities


Managing the performance of non-core businesses

Dealing with conduct matters affecting the UK banking sector and making additional provisions for UK conduct charges in relation to Payment Protection Insurance (PPI) and interest rate hedging products.

Sold 31.8% of our interest in US based subsidiary Great Western Bank with plans to sell 100% over time, subject to market conditions.

Accelerating run off of our UK Commercial Real Estate portfolio, including the sale of a £625m portfolio of mainly impaired loans.


Regulatory change

Maintaining a strong capital, liquidity and funding position.

Stable funding index of 90.4%, up from 72% in 2008.

Continue to monitor and manage regulatory changes including the Dodd-Frank Wall Street Reformed Consumer Protection Act 2010 (‘The Dodd-Frank Act’) in the US, Stronger Super in Australia and Basel III in Australia and the UK.

Actively participating in regulatory review processes, including Financial System Inquiry.



Increased competition for business banking
customers


Renewed focus on improving customer experience.

Hiring more front line business bankers to better serve our customers and win new business.

Improve banker effectiveness through better sales disciplines and centralising activity into fulfilment centres.


Technology transformation

Technology transformation capabilities deployed between 2010 and 2012 have matured.

Continued innovation in customer payments and investment in underlying technology.

Progress on core transformation program will allow us to move to smaller and more frequent capability improvements aligned to our strategy.


NAB Wealth

Cash earnings improved 13% in 2104. We are evaluating a number of options to improve overall returns for this business.

Strengthening systems and processes and responding to regulatory change.

Building stronger alignment with our retail bank, through increasing the number of wealth advisors in stores. Continuing our trust and transparency agenda in providing sound financial advice to our customers.


››› Read more about our strategy on pages 14–19, or read more about our Risk Disclosures on pages 13–19 of our 2014 Annual Financial Report.

Our strategy


We are making our operations simpler and more efficient, and shaping our products and services to better meet our customers’ needs. We are taking steps to improve our digital banking offering. We are also focused on reducing risk in our UK business. Adjusting our international portfolio enables us to further focus on strengthening our Australian and New Zealand franchises.

Simplify and digitise


Our strategy seeks to enhance the customer experience and increase efficiency, to position us to meet the demands of a rapidly digitising world. In 2014, we streamlined a number of operational areas, while bringing to market a number of innovative offers.

More mobile, digital and self-service options


We’ve shaped our offer to meet current and future needs of customers. In 2014 we saw continued, rapid uptake of our mobile, digital and contactless products:

58.5% of all the internet banking logins are via mobile devices (August 2014)

5.3m funds transfer transactions are now made on mobile devices each month

96% increase in the number of customers using contactless ‘tap’ technology

130% increase in the number of transactions via contactless ‘tap’ transactions

NAB Smart Stores were first launched in September 2013, and were rolled out throughout 2014 to provide interactive, self-service technology that enables customers a mix of service options. NAB Smart Stores aim to digitise simple banking transactions and focus banking relationships around providing customers with help, guidance and advice.

NAB Smart Stores also deliver efficiencies with reductions in building cost compared to a traditional full service stores. NAB’s network now includes an increasing number of stores with smart ATMs, which offer more self-service options.

In 2014 our Business Banking platform, NAB Connect, underwent a significant upgrade, which in many cases reduced the number of screen interactions by more than 50%. For example, the process of authorising 10 different types of international payments has been reduced from 40 steps to three. By April 2014 all NAB Connect customers had been migrated across to the new platform. The upgrade has resulted in a record for transactions processed on a single day – $8.2b compared to $6.5b previously. Ongoing development aims to further improve the overall customer experience.

Simplifying our NAB Traveller Card in June 2014, adding new functionality, has helped deliver a 30% increase in the amount of funds customers load onto their card when travelling.

In 2014 NAB’s online trading platform nabtrade acquired over 28,000 new accounts and more than 66,000 in total since its launch in October 2012. Customer assets have grown more than 40% since launch.

With more than 1500 ASX research recommendations, nabtrade is now rated #1 by Investment Trends 2014 Australian Broking Report for company research, trading ideas and strategies among the major Australian banks.

Customer satisfaction for nabtrade was up 9% to 79% (12 months to August 2014). The growth of nabtrade was supported by ongoing customer feedback – with 65 enhancements made to nabtrade during the year.


Simplifying our business


Successful upgrades to our data centres, networks and operating systems have delivered major improvements to the way we’re doing business. Our NABit Product Solutions has now been rolled out to NAB Business and nabtrade, due to its earlier success in Personal Banking in 2013. NABit provided a search engine for common customer questions on core banking products, which consolidated several databases into one. It reduced the time for a new employee joining our call centre to meet customer service standards and call quality competency.

In five months, NABit reduced the number of calls from our branch staff to a banking support area from over 15,000 each month to less than a few hundred calls each month.

Our core banking upgrade is also enabling simplification in response to the demand for an integrated customer experience. Our core banking platform, NextGen, has delivered securitisation, a new general ledger, a new credit risk engine, funds transfer pricing and our core banking foundation. This year we began rolling out NAB View to 4500 business bankers. Part of the NextGen program, NAB View is an innovative platform that allows bankers to better understand customers by aggregating all product relationships in one place. The underlying customer hub holds more than 12m customer records, and has integrated banker tools. We are progressing towards utilising the platform to originate personal use products.

More efficient data centres


NAB has the first Australian data centre to achieve US Green Building Council LEED Platinum certification.16

NAB’s new air-cooled facility also uses much less energy and 98% less water than the average water consumption at NAB’s existing data centres. It is now among the most modern, secure and energy-efficient infrastructure hubs in the southern hemisphere. Our Hong Kong Hysan Place building also obtained LEED Platinum certification this year.


Innovating with UBank


As NAB’s 100% online bank, UBank delivers simple lending, transactional and deposit products in a low-cost and fully automated model. UBank provides NAB with an enviable foothold in the rapidly digitising banking sector. During 2014 UBank gained 80,000 new customers – with 85% of all UBank home loan customers new to NAB17.

While NAB announced a $106m write down (in October 2014) relating to certain assets within the NextGen program, the cost to acquire each UBank home loan dropped by 20% from last year. UBank’s deposit book has remained strong, opening 70,000 new transaction accounts. A 30% holding of NAB’s self-managed super fund relationships and a 20% minimum deposit requirement for all home loan applicants, has underpinned UBank’s strong balance sheet.


Our UBank awards


UBank won the Financial Review’s Smart Investor Blue Ribbon Award for Best Direct Institution of 2014 for the third consecutive year, and was named as the Banking Website and Online Banking Offering of the year at the 2014 Australian Banking and Finance awards. UBank’s Roy Morgan customer satisfaction score of 83.0% ranked UBank ahead of all four major Australian banks and was higher than the average of all banks in Australia.18

Protecting our customers


Whilst fraud continues to be a significant threat facing individuals and businesses today, our best defence is personal vigilance in partnership with NAB’s security systems. NAB provides security and protection via technology, 24/7 monitoring and customer service. Education is crucial in assisting customers to limit the success of fraud attempts.

We continued to raise security and fraud awareness throughout 2014 by once again partnering with the federal government on a number of initiatives, such as the Stay Smart Online website. These events helped raise awareness amongst the Australian public on steps that they can take to protect their personal and financial information online.


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