National Australia Bank says it will cop an extra $525 million after-tax hit through new customer remediation costs, mostly related to its wealth arm.
The bank on Thursday said the new charges are expected to reduce cash earnings for the first half of the 2019 financial year by an estimated $325 million, and earnings from discontinued operations by an estimated $200 million.
In combination with provisions raised in second half od the 2018 financial year, which have not yet been utilised, this brings NAB’s total provisions for customer-related remediation after the financial services royal commission to $1.1 billion at March 31.
“We are putting things right where we have treated our customers poorly and making sure that they are compensated more quickly,” chief executive Philip Chronican said.
The customer remediation, which all big banks have been undertaking to address issues including those heard by the financial services royal commission, remain subject to a review by auditors.
Of the 1H19 charges, more than 90 per cent are for wealth related matters, including remediation for certain consumer credit insurance sales, non-compliant advice provided to wealth customers, adviser service fees charged by NAB Financial Planning, and adviser service fees charged by NAB Advice Partnerships.
NAB has made about 360,000 payments to customers with a total value of about $145 million since June 2018.
Mr Chronican said the bank will be increasing the number of staff dedicated to remediating customers from 350 to 500.
NAB’s former chief executive Andrew Thorburn and chairman Ken Henry resigned in February after being named and shamed in commissioner Kenneth Hayne’s final report, with Mr Chronican stepping in as interim chief executive.
Shares in NAB were worth $25.24 before trade on Thursday, down more than 11 per cent from $28.44 a year ago.