At NAB, McEwan is dealing with the more devastating economic and financial consequences of COVID-19.
McEwan’s back-to-banker school strategy was motivated in part by the Australian banking royal commission (observed by him from the UK), which exposed greed, misconduct and a minefield of incompetence and blunders in the industry.
Australian banks haven’t been getting it right, and that came through in the royal commission loud and clear. […] We were getting some of the most basic things wrong.
NAB CEO Ross McEwan
“Australian banks haven’t been getting it right, and that came through in the royal commission loud and clear,” he said. “I don’t think there was any maliciousness in what came out of the royal commission, (rather) it was that banks were making far too many mistakes, there was no consistency around a number of areas in dealing with customers. We were getting some of the most basic things wrong.”
McEwan is quick to point out that he employs some of the most talented people in the business, but the bank lacks consistency when it comes to skill levels and processes.
And while it might seem like a strange thing to address staff education in the middle of a pandemic, the challenges facing customer-facing staff over the past three months and over the next six months shouldn’t be underestimated.
All banks will need to deal with the COVID credit crunch – set to hit in September, when the JobKeeper wage subsidy scheme rolls off and the interest rate holidays accessed by small business and mortgage holders come to an end.
It’s a topic banks loathe talking about because it will truly test the relationship between them and their customers.
With an unemployment rate expected to hit at least 8 per cent in September, there will inevitably be a spike in delinquencies by small business and home loan borrowers.
McEwan doesn’t shy away from the fact that tough decisions will need to be made by NAB, but he does contend that many customer loans can be accommodated using other means like using up existing buffers or moving to interest-only loans.
He said that between 10 and 15 per cent of those who had previously applied to have their interest payments deferred have now moved back to their normal payment schedule.
That leaves 85 per cent to 90 per cent of COVID-impacted customers still requiring assistance at this stage.
The freshly trained bankers may also need to accommodate different ways of dealing with customers.
Around 50 per cent of NAB’s staff will not return to working at the office for several months and many won’t ever return, McEwan says. And of those that go back to the branches, some won’t stay there.
McEwan said over the past 12 weeks over-the-counter transactions have fallen by 40 per cent.
“I predict it won’t go back to what it was pre-COVID,” he said.
This points to the inevitable cull of bank branches – a customer and politically sensitive topic that bank chief executives always try to avoid. This is partly because branch closures are associated with job losses and depriving more vulnerable and older customers with access to bank services.
It is also one that won’t be dealt with during the pandemic. Banks will wait to see how many customers are using branches and ATMs when the health scare is in the rearview mirror.
“There will be a change to the branch network over the next 12 to 24 months based on transactions not happening there any more and people and businesses not wanting to touch cash,” McEwan flagged.
Elizabeth Knight comments on companies, markets and the economy.