NAB Sees Recouping Wealth Management Market Share in 2 Years

National Australia Bank Ltd. (NAB) expects to recoup lost wealth management market share in two years by selling more retirement products and making better use of the bank’s retail network.

Australia’s largest lender by assets has put in a new wealth management team and is cutting costs, Andrew Hagger, who was appointed head of the bank’s wealth business in April, said in an interview in Sydney yesterday.

Profit before one-item items at the bank’s wealth unit, the country’s second-largest retail fund manager, fell 13 percent to A$482 million ($439 million) in the year ended Sept. 30 from a year earlier and was down from A$609 million in the year-ended September 2010, according to filings by the bank. That compares with increased 2013 earnings for wealth units at Commonwealth Bank of Australia and Westpac Banking Corp. (WBC)

“We do know our natural share is higher than the current share,” Hagger said. “When I took up the role last year, we realized it would take something like a three-year period to begin to realize the potential. We are part way through that journey.”

NAB Wealth had market share of 15.3 percent in retail funds management as of June 2013 compared with 16 percent two years earlier, according to regulatory filings by the bank. The business had A$145.1 billion under management as at Sept. 30.

Shares in National Australia Bank fell 0.1 percent to A$34.4 at 11:39 a.m. in Sydney, taking losses for this year to 1 percent.

Leadership Team

NAB in April 2013 appointed eight of the current 10-member wealth management leadership team. Hagger has since redeployed staff to insurance where a new 12-member team is working on claims.

The bank bought MLC Ltd., its main wealth management business, in 2000 from Lend Lease Corp. for A$4.56 billion. MLC’s Universal Super Scheme was Australia’s eighth-largest pension fund in June 2013, according to the Australian Prudential Regulation Authority.

Bank customers are being made more aware of the wealth products and the two units are sharing offices, technology and employees, Hagger said.

“In hindsight, a closer integration with the bank soon after the acquisition of MLC, would have put the business in a stronger position,” Hagger said.

Insurance Turnaround

While Hagger was confident closer links with the banking network and retirement advice will boost market share, he said the life insurance business would take time to turnaround.

Life insurance in Australia is struggling with rising claims and policy lapses, forcing insurers to bolster reserves. National Australia Bank increased its reserves by A$57 million in the year ended Sept. 30, according to filings by the bank. The insurance business reported a 82 percent drop in 2013 profit before one-time items and certain investment earnings to A$30 million, the filings show.

“My focus is to help navigate the business through the cyclical and structural issues and focus on us becoming a stronger insurance operator,” Hagger said. “That’s why, over the last year, we’ve strengthened our claims operations, invested in our retention initiatives and we’ve continued to build our product.”

To contact the reporter on this story: Narayanan Somasundaram in Sydney at nsomasundara@bloomberg.net

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net Iain McDonald, Tomoko Yamazaki

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