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NAB sets aside $314m to compensate "let down" customers

Business

The National Australia Bank is setting aside $314 million for customer remediation programs, becoming the latest big bank to take a big profit hit due to compensation.

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NAB says second-half cash earnings – the banks’ preferred measure of profitability – will take a $261 million hit from refunds and compensation for issues including adviser service fees and plan service fees.

The remaining $53 million is related to discontinued operations.

In a statement to the Australian Stock Exchange, the bank said it would compensate customers “let down” by “issues” in its wealth business, including advisor service fees and plan service fees.

The costs will be the last for NAB in the 2018 financial year, the results of which will be reported on November 1, but the lender says there could be more to come as customer remediation programs continue into FY19.

“Where we have let customers down, we are determined to put things right,” NAB chief executive Andrew Thorburn said in a statement.

“We have made good progress in resolving a number of issues that impacted our customers and we want to compensate them as quickly as possible.”

Approximately 69 per cent of the cash earnings hit will affect revenue, with the remainder reported in expenses.

NAB already said in its third-quarter trading update that the costs are excluded from full-year expense growth guidance of between five and eight per cent.

Costs associated with responding to the royal commission are not included.

Rival ANZ last week outlined $421 million in remediation costs, while Westpac has set aside $235 million and is tipped to make more.

Commonwealth Bank, which is on a different reporting calender to its major rivals and has already announced its 2018 results, last week launched a remediation program for deceased estates.

– AAP

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