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National Australia Bank (or NAB) is one of the largest financial institutions and banks in Australia in terms of market capitalisation and customers. NAB is ranked 17th largest bank in the world measured by market capitalisation, it held total assets of A$657 billion as of 30 September 2008 and its operating income in 2008 was A$15.4 billion. It operates across 10 countries serving 8.3 million consumer and business banking customers and over 2.3 million wealth management customers.

NAB operates 1,714 branches and service centres and 2,939 ATMs globally. NAB has a "AA" senior debt rating by S&P.

Core business

NAB logo
The National Australia Bank Group is organised around five key businesses: Australia - NAB, UBank and MLC brands; United Kingdom - Clydesdale Bank and Yorkshire Bank brands; New Zealand - Bank of New Zealand brand; United States of America - Great Western Bank brand and Wholesale Banking (formerly nabCapital), which operates internationally.

In Australia, the group maintains three consumer facing visual identities: NAB, MLC and UBank.

Early history

In 1893, National Bank Limited was formed. Up until 1 October 1981 it continued to trade as The National Bank of Australasia Limited, only after the merger with the Commercial Banking Company of Sydney Limited did it become known as National Australia Bank.

National Bank of Australasia Limited

In 1858 Alexander Gibb, a Melbourne gentleman, enlisted Andrew Cruickshank, a local merchant and pastoralist, to raise the capital to establish National Bank of Australasia with headquarters in Melbournemarker. Cruickshank became its first chairman while Gibbs left after being passed over for the position of General Manager. The bank opened its first branch in South Australiamarker the same year.

Expansion to other Australian states followed, with branches opening in Tasmaniamarker (1859), Western Australiamarker (1866), New South Walesmarker (1885) and finally Queenslandmarker (1920).

An early branch established in Mauritiusmarker (1859) closed within a year, but a Londonmarker branch (1864), established to handle financing and payment for Australian exports of wool, gold and other commodities, and imports to Australia, was more successful.

National Bank of Australasia was one of many banks that closed its doors during the banking crisis of 1893. Director John Grice was active in the crisis, from which the bank re-emerged as a public limited company, incorporated on 23 June 1893.

For the next half century, growth was stimulated by a number of acquisitions:
  • Colonial Bank of Australasia (est. 1856) in 1918, bringing additional branches in Victoriamarker and New South Wales.
  • Bank of Queensland in 1922, with branches in Queensland, New South Wales and Victoria. The Bank of Queensland was itself result of the merger in 1917 of Royal Bank of Queensland (est. 1886) and Bank of North Queensland (est. 1888).
  • Queensland National Bank (est. 1872) in 1948, with branches in Queensland, New South Wales and Victoria.
  • Ballarat Banking Company (est. 1865) in 1955


The bank opened a representative office in Tokyo in 1946, later upgraded to a branch in 1985. The bank's overseas interest expanded more rapidly in the 1970』s. It opened a branch in Singapore in 1971, and representative offices in Jakarta (1973) and Hong Kong (1974). It took minority interests in merchant banks in these locations at the same time, and in Hong Kong established a 50-50 joint venture merchant bank with Mitsubishi Bank and Trust, but withdrew from these arrangements in 1984. Its first US presence was established in 1977 with a branch and an agency in Los Angeles that closed in 1993.

The Commercial Banking Company of Sydney Limited (CBC)



On the 8 September 1834 the Sydney Herald carried a notice titled "Commercial Banking Company of Sydney" proposing the establishment of a new bank. It began operations on 1 November 1834 and in 1848 was incorporated by an Act of the New South Wales Parliament. Sir Edward Knox was the first Bank Manager and later a director. Thomas Barker (born 1799 London, England, died 1875 Bringelly, New South Wales), a manufacturer, engineer, politician, landowner and philanthropist was a notable director and chairman.

The CBC grew to service the expanding pastoral and farming industries of the then Colony of New South Wales.

1980-2000 merger and rapid overseas expansion

MLC logo
In 1981, National Bank of Australasia Limited merged with The Commercial Banking Company of Sydney Limited to form National Commercial Banking Corporation of Australia Limited and subsequently changed its name to National Australia Bank Limited (NAB).

The expanded financial base of the merged entity triggered significant offshore expansion over ensuing years. Representative offices were established in Beijing (1982), Chicagomarker (branch 1982), Dallasmarker (1983), Seoulmarker (1983, upgraded to a branch in 1990), San Franciscomarker (1984), Kuala Lumpurmarker (1984), Athensmarker (1984, closed 1989), Frankfurt (1985, closed 1992), Atlantamarker (1986), Bangkok (1986), Taipeimarker (1986 upgraded to branch 1990), Shanghai (1988, closed 1990), Houstonmarker (1989) and New Delhimarker (1989).

In 1987, NAB bought Clydesdale Bank (Scotlandmarker) and Northern Bank (Northern Irelandmarker and Republic of Irelandmarker) from Midland Bank. It rebranded Northern Bank branches in the Republic of Ireland to National Irish Bank and changed both banks' logos from that of the Midland Bank. In 1990, NAB bought Yorkshire Bank (England and Wales).

Further acquisitions followed - Bank of New Zealand in 1992, which at the time had about a 26% market share in the New Zealand market, and Michigan National Bank (MNB) in 1995. NAB had earlier rationalised its operations in the US and closed its offices in Atlanta, Chicago, Dallas, Houston, and San Francisco in 1991.

This period of rapid expansion through acquisition concluded with the purchases in 1997 of HomeSide Lending, a leading US mortgage originator and servicer based in Floridamarker, and most significantly, the acquisition in 2000 of MLC Limited (and related MLC entities) for $4.56bn, one of the biggest mergers in Australian corporate history.

NAB encountered a difficult period in the period 2000-2005. In 2000, NAB sold Michigan National Bank to ABN AMRO, then in 2001 sold HomeSide's operating assets for US$1.9b to Washington Mutual, the largest US savings and loan company, as well as the mortgage unit's loan-servicing technology and operating platform.

Challenges

HomeSide (USA)

NAB booked two write-downs associated with HomeSide. First, in July 2001, NAB had a $450 million write down of the value of its capitalised mortgage servicing rights (CMSRs) during the quarter ending June 30, 2001, and was the result of exceptionally high mortgage refinance volumes which lowered the value of the CMSRs, combined with a more challenging capital markets environment in which to hedge interest rate risk. This was followed shortly by a second write-down reported in September totalling $1.75 billion; this second write-down consisted of US$400 million from an incorrect interest rate assumption embedded in the mortgage servicing rights valuation model, US$760 million from changed assumptions in the model flowing from the continued unprecedented uncertainty and turbulence in the mortgage servicing market, and US$590 million from writing off of the goodwill. In total, NAB booked $2.2 billion in losses due to HomeSide.

Foreign currency trader staff fraud

In 2004, NAB discovered that as a result of unauthorised spot trades on its foreign currency options desk, losses totalling $A360 million had been covered up. Investigations by Price Waterhouse Coopersmarker and the Australian Prudential Regulation Authority highlighted a need for cultural change. The losses were a result of a failed speculative position where the traders falsified profits to trigger bonuses over a number of years. In order to actually generate the reported profits, the traders speculated on the US dollar, betting that it would rise against the Australian dollar and other currencies. This incident led to the resignations of CEO Frank Cicutto and Chairman Charles Allen. In 2006, two former NAB foreign currency options traders were sentenced on charges brought by ASIC - David Bullen for 44 months imprisonment, Vincent Ficarra for 28 months.

Tax evasion and customer overcharging in Ireland

The Irish subsidiary of the bank, National Irish Bank was the subject of a six-year Inquiry carried out by Inspectors appointed by the Irish High Court. They established that National Irish Bank had engaged in overcharging its own customers and tax evasion schemes prior to 1998. Mr Justice Peter Kelly, an Irish High Court judge commented following publication of the Report "The edifice of banking is built on a foundation of trust. On the Inspectors findings there was a breach of trust. The operation was carried out over a period of years in a deliberate fashion". The Director of Corporate Enforcement subsequently applied to the High Court to have 9 senior managers barred from being an officer of any company.

Turnaround

Logo change in Australia 2007
In 2005, NAB announced a cut of 2,000 Australian jobs as part of a global cost-cutting program with the intention of cutting around 4,200 positions – about 10.5% of its total workforce globally.

It began to outsource back office positions offshore, beginning with a pilot with 23 jobs from the accounts payable department in Melbourne going to Bangalore, Indiamarker in an agreement with Accenture. Later that year, it sold Northern Bank and National Irish Bank to the Danish Danske Bank. Over 200 additional jobs had been sent offshore by 2006.

By 2006, NAB had turned its fortunes around, reporting an industry record $4.3 billion profit and winning two local Bank of the Year awards. It also had a major reform which included the refurbishment of all of its branches, and the replacement of signage in and around National branches and buildings, being changed from 'National' to 'nab'.

In May 2007 NAB announced that it would delist from the New York Stock Exchangemarker, and this took place in Aug 2007. NAB delisted from the London and Tokyo exchanges in 2006.

In March 2008 NAB announced that it would send maintenance and support for some core banking applications to India through an offshoring arrangement with Infosys and Satyam, affecting another 260 employees.

Global Financial Crisis

On 25 July 2008, NAB's announcement of an additional $830 million (AUD) provision associated with deterioration in US real estate markets triggered the biggest single-day fall in its share price in 21 years, wiping over $7 billion (AUD) from the stock's value.

Growth

UBank logo
In October 2008, NAB launched a branchless direct bank bank trading separately as "UBank". NAB stated it aimed to attract new retail customers while operating independently to its other retail brands.UBank operates under NAB's banking license and participates in the Australian government's new deposit guarantee scheme.Deposits were said to exceed over $500 million in one month.

UBank was reported to be the first beneficiary of NAB's broad ranging technology replatforming project.
 UBank is cited as an example of effective use of nontraditional marketing such as social media.
NAB claimed UBank's "customer advocacy and satisfaction levels" to be "amongst the highest of any institution in Australia"In August 2009, UBank launched a new online savings account ("USaver") that was reported to differentiate through its easy online application process.In it's 2009 annual report, NAB claimed "almost 10,000 new customers in a month" for UBank's USaver product.

In January 2009, Cameron Clyne took over as Group CEO from John Stewart. In June 2009 NAB announced it was to pay A$825m ($660m:£401m) for UK insurer Aviva's Australian wealth management businesses Navigator. The deal was NAB's first acquisition under Cameron Clyne. NAB beat off competition from AMP for Navigator.

In July 2009 NAB acquired an 80% stake in the private wealth management division of Goldman Sachs JBWere, for A$99m..

In August 2009 NAB announced it's acquisition of the mortgage business of Challenger Financial Services for $385 million. This purchase also includes PLAN, Choice, and FAST mortgage aggregation businesses and approximately 17.5% in Homeloans Ltd. This transaction was seen in relation to rivals Commonwealth Bank's purchase of non-bank lenders Aussie Home Loans and Wizard Home Loan in late 2008, and Westpac's purchase of RAMS Home Loan in 2007.

Sponsorship

The National Australia Bank is a major sponsor of Australian rules football, both at grassroots and elite level. It supports Auskick, an initiative to improve young footballers, as well as the NAB Cup (an Australian Football League pre-season competition), the NAB AFL Rising Star award; and the AFL National Draft. Other significant sporting sponsorships include the Socceroos, and the 2006 Commonwealth Games. Support is also given towards community group volunteers around Australia. In recent years, NAB has provided financial support and relief to drought affected farmers. From 2008-2010 NAB is sponsoring the South Sydney Rabbitohs.

Customer Relationship Management

NAB has received recognition as an early adopter and leader in CRM (Customer Relationship Management).It is a large user of the Siebel CRM software and developed and implemented its "National Leads" analytical CRM system to support its sales force in identifying relevant customer sales & service opportunities.

In 2006, NAB revamped its CRM system having slipped behind other banks investing in CRM platforms using cutting-edge technology.

NAB also deployed its National Leads system to New Zealand and United Kingdom. In 2006, NAB was named the winner of the IFS/Cap Gemini Financial Innovation awards for its National Leads system.

Corporate responsibility initiatives

In 2008, NAB invested $33.5 million in corporate responsibility initiatives. Its target is to spend 1% of cash earnings before tax in this area.

Key people

Group Managing Director and CEO: Cameron ClyneCEO of NAB Personal Banking in Australia: Lisa GrayGeneral Manager NAB Broker: Matt LawlerCEO of NAB Business Bank in Australia: Joseph HealyGeneral Manager of UBank: Gerd SchenkelCEO of Clydesdale and Yorkshire in UK: Lynn PeacockCEO of BNZ: Andrew ThorburnPresident Great Western Bank: Jeff Erickson

Financial summary

NAB House, Melbourne
NAB Australian Headquarters at Melbourne Docklands
Financial Year Cash Profit, $m Total Assets, $b
2008 4,724 657
2007 4,386 612
2006 3,782 484
2005 3,156 423


References



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