The National Australia Bank has warned its first-half earnings will take a $1.14 billion hit due to rising remediation costs, troubles in its life insurance business and changes to accounting for technology projects, all compounded by the ongoing impact of the coronavirus crisis.
Senior banking analyst Brett Le Mesurier said that the combination of factors made it “virtually certain” the lender will cut its dividend payout this year, following the prudential regulator’s warning to banks to consider deferring or slicing payments to safeguard capital buffers as the sector braces for growing loan losses.
Meanwhile, Bell Potter analyst TS Lim predicts NAB will lower the payout ratio to 60 per cent. “It’s just my gut feel,” he said. “It’s the right thing to do.”
In an ASX statement released on Monday, NAB said it has again increased the provision for customer remediation by $268 million, with the bulk of claims related to “newly identified matters, the most significant related to workplace superannuation”. NAB increased its misconduct bill in October by $1.18 billion to refund customers for dubious insurance and financial advice that was either defective or never provided.
The details of the claims, as well as the impact on the coronavirus more broadly, will be revealed at its half-year results next month. The earnings warning comes as chief executive Ross McEwan last week asked employees to be flexible and cautioned job cuts were inevitable as the sector grapples with the impending recession.