The new chief executive of NAB has admitted the hunt for quick growth has helped create a crisis in the Australian banking industry over its mistreatment of customers.
Ross McEwan fronted shareholders at NAB’s annual meeting in Sydney on Wednesday, the day after the corporate regulator hit the bank with a fresh lawsuit over charging customers fees for services they did not receive.
The bank has slashed executive and director pay hoping to avoid a second “strike” against its remuneration report and an automatic vote on whether to spill the entire board, after being humiliated with an 88% vote against the report last year.
It is also bracing for possible action by the financial intelligence agency Austrac, which is investigating it over potential breaches of anti-money laundering and counter-terrorism finance laws.
Over the past two years Austrac has developed a reputation as the most fearsome of the banking sector’s alphabet soup of regulators, hitting the Commonwealth Bank with a $700m fine in 2018 and filing a blockbuster lawsuit against Westpac last month that triggered a crisis that has cost the bank’s chairman and chief executive their jobs.
NAB lost its chairman, Ken Henry, and chief executive, Andrew Thorburn, in February when they resigned following scathing criticism from the banking royal commissioner, Kenneth Hayne, in his final report.
The royal commission returned to haunt NAB on Tuesday when the corporate regulator launched its legal action over a fees-for-no-service scandal examined during the hearings last year.
In a federal court lawsuit, the Australian Securities and Investments Commission alleges NAB broke the law more than 10,000 times by charging fees it was not entitled to collect and failing to keep records showing any evidence services were provided.
The alleged breaches, which involved more than $70m in fees charged to more than 50,000 customers, are punishable by a theoretical maximum fine in the billions of dollars under a penalty regime that has been beefed up in response to years of scandal plaguing the banking sector.
However, based on previous court rulings, NAB is unlikely to pay anywhere near that.
McEwan told the AGM that NAB would “continue to work cooperatively with Asic to deal with this issue”.
“Trying to find constant improvement in financial performance, every quarter, is one of the things that I believe has caused so many customer issues across the financial services industry,” he said.
NAB’s chairman, Phil Chronican, who served as interim chief executive until three weeks ago after stepping into the role following Thorburn’s exit, told shareholders that “NAB has lost a lot of trust and significant changes need to be made”.
“The royal commission demonstrated the gap between how we have been operating and how our customers, shareholders and the community expect us to operate,” he said.
“We will not let time dull the impact of the royal commission, nor will we gloss over its findings.”
He said the bank stripped most of its top executives of “significant amounts” of bonuses due from the years between 2016 and 2018 and had reformed how bonuses would be paid in future.
Executives would get no short-term bonus and no pay rise this year and directors had taken a 20% cut to fees, he said.
Despite some angry questions from the floor – including one shareholder who demanded the bank fight the regulators besieging it – there was no large-scale rebellion against the remuneration report or directors facing re-election.
More than 97% of shares were voted in favour of the remuneration report, killing the prospect of a board spill, and the directors who were up for re-election – Chronican, Douglas McKay and Kathryn Fagg – were endorsed by a similar margin.
Climate crisis-related motions brought by activist shareholders Market Forces and the Australasian Centre for Corporate Responsibility attracted votes of 12.9% and 15% respectively.
