February 13, 2020 / 4:03 AM / 2 months ago

Australia's NAB considers strategy revamp, share sale

Sydney (Reuters) - National Australia Bank Ltd (NAB.AX) is considering a fresh share sale and will revamp its strategy, as its new CEO seeks to put the country’s third-largest lender back on the growth track following a series of scandals that roiled the banking sector.

The National Australia Bank Logo is seen on a branch in central Sydney, Australia, February 8, 2018. REUTERS/Daniel Munoz

NAB named Ross McEwan as chief executive in July after criticism levied at its top management by a powerful inquiry into industry misconduct triggered the departure of former CEO Andrew Thorburn.

“Work is underway to refresh our strategy and build a plan for the next five to ten years,” McEwan said on Thursday in his first trading update since taking the top job on Dec. 2.

He said the strategy would be built upon its ambition to be a bank that “gets the basics right, delivers for customers, is safe and secure and has the culture we need for NAB to be a leading bank again.”

Broker UBS said the new strategy could include higher technological investment, more provisions to remediate customers and cuts to bank fees.

“We would not be surprised if these initiatives were funded with a further capital raising, which would strengthen the balance sheet,” UBS said in a note to clients.

NAB said it is considering raising new Tier 1 capital and converting A$750 million (£388.9 million) notes into ordinary shares, as it seeks to meet toughened capital requirements.

NAB’s capital levels have come under pressure due to the A$2.07 billion that it had to dole out to compensate aggrieved customers after an inquiry last year revealed widespread misconduct in the financial sector.

The bank struggled to meet the new common equity tier 1 (CET1) minimum regulatory requirement of 10.5% by Jan. 1, prompting it to cut its dividend and raise additional capital last year.The ratio, a closely watched measure of the bank’s spare cash, rose to 10.6% at end-December from 10.38% three months ago, NAB said.

“Customer-related remediation programs and regulatory compliance investigations are continuing, with potential for additional charges although amounts and timing remain uncertain,” McEwan said in the statement.

Morningstar estimated that NAB would incur penalties of around A$750 million this year to cover breaches of anti-money laundering laws and civil penalties for multiple missteps in financial planning.

NAB posted cash earnings of A$1.65 billion ($1.11 billion) for the three months ended Dec. 31, unchanged from the year ago.

“While early days into McEwan’s stewardship, investors should be comforted that earnings are on track,” Citigroup analysts said in a note to clients.

NAB shares rose 1.3% on Thursday in a largely flat market .

Reporting by Paulina Duran in Sydney, Niyati Shetty and Rushil Dutta in Bengaluru; Editing by Miyoung Kim & Shri Navaratnam

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