NAB takes AU$200 million writedown on failed ERP project
The NAB said today that, after an extensive review, it had written down application software employed in the failed Integrated Systems Implementation (ISI) project, which had supported the enterprise resource planning strategy, by AU$200 million to its recoverable amount of AU$87 million. Other software with a carrying value of AU$209 million -- employed in the Financial Services operations in Australia, Europe and New Zealand, corporate and institutional banking and the Wealth Management operations in Europe and Australia -- was also written off as a result of the review.
The post-tax charge to the NAB's profit and loss totalled AU$307 million.
The recoverable amount of the ISI software was determined through a valuation methodology performed by an external party, the NAB said.
These actions, the NAB said, reduced the written down value of software on the balance sheet as at 30 September 2004 to AU$655 million.
The NAB also said it had reviewed software amortisation periods and reduced them to a maximum of five years. Previously, the ISI program had been amortised over 10 years and a group bank teller platform, customer relationship management system in Australia and data warehouse over eight years.
The highly-publicised ISI project has been completely laid to rest, with the enterprise resource planning strategy "ceased" and implementation of further modules of the software "indefinitely deferred," the NAB said.
The announcement follows the appointment last month of Michelle Tredenick as chief information officer for the NAB in Australia. Information technology sits in a support unit within the NAB, while a products unit is responsible for end-to-end product management and integration of risk, information technology and operational processes into products.
The NAB had earlier announced the replacement of group chief information officer Ian Crouch with the executive general manager of financial services Australia, Ian MacDonald, as part of a management restructure designed to rebuild the NAB's reputation.
The bank kicked off its management restructure after a rogue trading scandal involving four currency traders cost it more than AU$350 million.
A subsequent report into the scandal by the Australian Prudential Regulation Authority uncovered a raft of organisational problems at the NAB, including a failure to supply documentation that would have allowed investigators to assess the integrity of the information technology systems used to facilitate currency option transactions.
The NAB announced an overall 15 percent slide in cash earnings to AU$3.46 billion for 2004 in a result chief executive Jon Stewart labelled as "poor and unacceptable" for the NAB and its shareholders.
He said there were four problems that had adversely affected the NAB's performance: a very complex and costly business structure, restrictive policies and practices that restrain our customer efforts, poor compliance processes and lack of a clear cultural framework.