National Australia Bank
“Market Cap $75.31 B As of May 2014
At a Glance
- Industry: Major Banks
- Founded: 1858
- Country: Australia
- CEO: Cameron Clyne
- Website: www.nabgroup.com
- Employees: 42,000
- Sales: $36.88 B
- Headquarters: Docklands
#74 Global 2000
- #246 in Sales
- #110 in Profit
- #40 in Assets
- #110 in Market value
National Australia Bank Ltd. is an international financial services company, which provides a comprehensive range of banking and financial services in Australia, New Zealand, the United Kingdom and Asia. It operates through the following business segments: Business Banking, Personal Banking, Wholesale Banking, NAB Wealth and NZ Banking. The Business Banking segment provides commercial banking services to business customers. The Personal Banking segment offers services to retail customers and small businesses. The Wholesale Banking segment is a global division with key lines of business comprising global markets, treasury, specialized finance, financial institutions and asset servicing. The NAB Wealth segment provides investments, insurance, financial advice and private wealth services. The NZ Banking segment offers a range of UK banking services in these geographies. The company also provides credit and access card facilities, leasing, housing and general finance, international banking, investment banking, wealth management, funds management, life insurance and custodian trustee and nominee services. National Australia Bank was founded in 1858 and is headquartered in Docklands, Australia.“
“National Australia Bank History
National Bank Limited was formed in 1893 and, until 1 October 1981, it traded as The National Bank of Australasia Limited, before merging with the Commercial Banking Company of Sydney Limited and changing its name to the National Australia Bank.
National Bank of Australasia
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 Melbourne. The legal work establishing the bank was performed by King & Wood Mallesons. Cruickshank became its first chairman while Gibb left after being passed over for the position of General Manager. The bank opened its first branch in South Australia the same year. Expansion to other Australian states followed, with branches opening in Tasmania (1859), Western Australia (1866), New South Wales (1885) and finally Queensland (1920).
An early branch established in Mauritius (1859) closed within a year, but a London branch (1864) was 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 Victoria 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.
Commercial Banking Company of Sydney
On 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.
Merger and rapid overseas expansion
In 1982, 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), Chicago (branch 1982), Dallas (1983), Seoul (1983, upgraded to a branch in 1990), San Francisco (1984), Kuala Lumpur (1984), Athens (1984, closed 1989), Frankfurt (1985, closed 1992), Atlanta (1986), Bangkok (1986), Taipei (1986 upgraded to branch 1990), Shanghai (1988, closed 1990), Houston (1989) and New Delhi (1989).
In 1987, NAB bought Clydesdale Bank (Scotland) and Northern Bank (Northern Ireland and Republic of Ireland) 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, andMichigan 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 Florida, 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.
The foreign currency trader fraud was the catalyst for the resignations of CEO Frank Cicutto and Chairman Charles Allen. The resignations were preceded by a Board revolt where Catherine Walters emerged as a whistle blower citing serious culture issues at the company having led to the string of failures.
Frank Cicutto was CEO of NAB from 1999 to 2004. The Australian economic environment during his leadership was stable and productive after 17 consecutive years of economic growth since 1992, averaging 3.3 per cent per annum.
In February 2004, John Stewart was appointed CEO of NAB following the sacking of Frank Cicutto. John proceeded with a far reaching re-organisation of the company along regional lines leading to the appointment of Ahmed Fahour as the CEO of Australia in September 2004.
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, India 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.
As part of the culture change program, a new Australian head office was purpose built at Docklands in Melbourne. This building is characterised by its open plan layout and was officially opened in October 2004. After Cameron Clyne became CEO in 2009, the Docklands building became the global headquarters replacing 500 Bourke Street.
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 Exchange, and this took place in August 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.
On 25 July 2008, NAB’s announcement of an additional A$830 million provision associated with deterioration in US real estate markets triggered the biggest single-day fall in its share price in 21 years, wiping over A$7 billion from the stock’s value.
Customer Relationship Management changes
NAB is a large user of the Siebel and Teradata CRM systems.
Whilst NAB has received recognition as an early adopter and leader in CRM (Customer Relationship Management) the system was reinvigorated in 2004/5 as part of the broader turnaround to support the new focus on cross-selling.
NAB also deployed its CRM system to New Zealand and United Kingdom.
In 2006, NAB was named the winner of the IFS/Cap Gemini Financial Innovation awards for its CRM system, internally called “National Leads”.
Launch of UBank
In October 2008, NAB launched a branchless direct bank trading separately as “UBank” under the leadership of Greg Sutherland and Gerd Schenkel.
NAB stated it aimed to attract new retail customers while operating independently to its other retail brands, and in its 2009 annual report, NAB claimed that this strategy had been “successful”. UBank operates under NAB’s banking licence and participates in the Australian government’s new deposit guarantee scheme.
Deposits were said to exceed over $500 million in one month.
UBank was cited as an example of effective use of nontraditional marketing such as social media, but also uses traditional marketing such as print and television.
NAB claimed UBank’s “customer advocacy and satisfaction levels” to be “amongst the highest of any institution in Australia”
In its 2009 annual report, NAB claimed “almost 10,000 new customers in a month” for UBank’s USaver product.
UBank has been acknowledged as the driver of NAB’s fast growth in deposit market share compared to other major banks.
NAB’s UBank has been compared to Qantas‘ Jetstar in terms of a strategy of internal innovation with the objective of opening new market segments for the parent company.
In August 2009, UBank launched a new online savings account (“USaver”) that was reported to differentiate through its easy online application process.
In December 2009, UBank’s USaver online savings account was awarded Money Magazine‘s “Best of the Best” award.
In February 2010, NAB stated that strong growth in UBank had positively impacted its household deposits.
At an Investor Briefing in February 2011, Executive Director & Group CFO, Mark Joiner, reported “UBank’s now well over $7 billion” when asked the source of the groups growth in deposits.
In March 2011, Cameron Clyne, claimed in an interview that UBank had reached $10 billion in deposits and would become a full service retail bank.
In October 2012, in a media interview about NAB’s results briefing, CEO Cameron Clyne claimed that UBank had “raised $15–16 billion in deposits”. This compares to $18.5 billion in deposits held by ING Direct as of September 2012. ING Direct is the incumbent leader of the direct banking segment in Australia and launched in 1999, 9 years earlier than UBank.
In February 2011, UBank launched its first home loan product (dubbed “UHomeloan”). Only 10 days after its launch, UBank dropped the interest rate of its loan by 0.10%pa.
In October 2011 UBank won the BAI Financial Global Product Innovation Award for its refinance mortgage UHomeloan.
In the 2012 Australian Lending Awards UBank was named Best Online Operator
New strategy 2009-2014
Since his appointment in January 2009, CEO Cameron Clyne has undertaken a strategy of reputation change, wealth management and a focus on Australia.
As part of this strategy, NAB’s underweight retail bank has – under the leadership of Lisa Gray – attempted to increase market share by competing on price and cutting fees.Initially denting earnings in the division, the strategy has produced mixed results over the medium term, with cash earnings, market share and customer satisfaction rising, but operating margin and cost to income ratio worsening since it began in 2009.
In line with the strategy, NAB attempted to differentiate itself from the other “Big 4” Australian banks in a large, national public relations campaign centred around a theme of “breaking up” with the other banks on Valentine’s Day 2011. The campaign received both a positive and negative reception. It also attracted swift competitive responses from other major banks. The campaign won an advertising award at Cannes.
In 2009, NAB acquired the mortgage business of Challenger Financial Services for $385 million, in order to boost its market share in the broker channel. The purchase also included the PLAN, Choice, and FAST mortgage aggregation businesses and approximately 17.5% in Homeloans Ltd.
NAB’s poor 2012 financial results, however, called its strategy into question: net profit dropped by 22% compared to the prior year.
The bank capitalised on the post GFC environment to attempt a number of acquisitions for its wealth management division.
In June it paid A$825m ($660m:£401m) for UK insurer Aviva’s Australian wealth management businesses, including their Navigator platform. 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 December 2009 NAB began a 9-month attempt to purchase AXA Asia Pacific. This attempt was blocked twice by the ACCC. The first time, in April 2010, was because the regulator believed that the merger would cause a substantial lessening of competition in the retail investment platform market. NAB subsequently lodged a revised bid which aimed to address these concerns however was rejected a second time in September of that year. The AXA deal’s drawn out process drew criticism for the Bank’s under performance.
Clyne has accelerated the bank’s core banking platform upgrade, dubbed “NextGen”, which is replacing legacy systems which are up to 40 years old with an Oracle-based solution. UBank was reported to be the first beneficiary of this project. In total, the project is expected to be completed in 2014 and cost $1 billion.
In March 2013, Lisa Gray took over leadership of the “NextGen” program.
As of April 2014, NAB’s “NextGen” program was said to suffer from “growing problems”.
On 25 November 2010, NAB suffered a system malfunction resulting in the failure of accounts processing. As a result, around 60,000 banking transactions were lost, and had to be manually recovered. The malfunction was caused by a corruption of an irreplaceable system file. This issue has been dubbed by some commentators as one of the biggest failures in the history of the Australian banking system.
New CEO 2014
In 2014, NAB announced the replacement of Cameron Clyne as CEO with Andrew Thorburn, NAB’s New Zealand head.”
*Information from Forbes.com and Wikipedia.org
**Video published on YouTube by “nab“