National Australia Bank Plans A$800 Million in Cost SavingsNarayanan Somasundaram
National Australia Bank Ltd., the country’s largest lender by assets, announced changes to its senior management team and said it plans to cut annual costs by A$800 million ($825 million) within five years.
The lender will simplify products, reduce duplication across the business and invest in new technology to make the savings, it said in a statement to the stock exchange today. Executive Director for Finance Mark Joiner will retire by the end of 2013 after seven years at the bank, while Steve Tucker will be replaced as head of NAB Wealth by Andrew Hagger. Lisa Gray, head of personal banking, will take on the new role of group executive for enterprise services and transformation.
National Australia Bank is joining rivals in seeking to cut expenses after full-year profit fell for the first time since 2009. The bank’s shares rose 11 percent in the five years through yesterday, the worst performer among the top four Australian banks.
The effective cost savings will be about A$550 million after higher amortization and investment spend, Deutsche Bank analysts led by James Freeman said in a note to investors today.
“In recent years NAB has already been delivering a higher level of productivity savings than this, and as such the market may be disappointed by the extent of the savings,” they said.
NAB’s shares dropped 1.9 percent to A$30.95 at the close of Sydney trading, the lowest in a week. The benchmark S&P/ASX 200 Index dropped 0.5 percent.
The planned savings will be partially offset by higher software amortization charges, reinvestment and implementation costs, NAB said in the statement. Upfront technology costs make it less likely for the bank to keep expense growth below revenue expansion in 2013, it said.
“The changes announced today, combined with continued investment in the business of over A$1 billion per annum, will reduce complexity and duplication,” Chief Executive Officer Cameron Clyne said in the statement.
Competitors have already cut staff and pay to protect profit. Australia and New Zealand Banking Group Ltd. slashed 1,000 jobs in the year to Sept. 30, and last week announced plans to pare 50 positions in its institutional unit.
Westpac Banking Corp. eliminated more than 500 roles early last year and Commonwealth Bank of Australia, the nation’s biggest lender by market value, said in July it would freeze base salaries for people making A$150,000 or more in its institutional banking and markets division.