NAB posts AU$89m in savings but says there is still more work to do

National Australia Bank (NAB) announced it continued to make progress in rolling out its digital investments during the first half of the 2016 financial year, posting a 6.5 percent increase in cash earnings to AU$3.31 billion and underlying profit of AU$5.1 billion, a 2.7 percent increase on 2015 half year.

The bank also reported a statutory net loss of AU$1.74 billion, which according to NAB was reflective of discontinued operations, such as the demerger of the company's UK arm, Clydesdale Bank, which was completed on February 8, 2016.

NAB Group CEO Andrew Thorburn said the company remains focused on improving returns for its Australian and New Zealand businesses and, while there is still more work to do, good progress has been made.

"We are focused on getting the basics right and serving our customers better. A year after adopting the Net Promoter Score we are seeing encouraging results. NAB has led the aggregate NPS outcomes of the major banks over the four months to March 2016 in our priority customer segments of mortgages, debt free, micro business, small business, and medium business. But there is still more to do," he said.

As a result of the technology enhancements during the half year, NAB said it made incremental productivity savings during the 1H15 of AU$89 million, and is on target of reaching ongoing annual savings of approximately AU$150 million per annum.

"This is our first result squarely focused on our Australia and New Zealand business. It shows that delivering against our strategic priorities in producing results and laying the foundations for sustainable growth and returns. We have a clear plan and are executing it in a disciplined way," Thorburn said.

Thorburn highlighted some specific technology improvements that were made during the half year included the launch of NAB Pay to initially allow Android-owning customers the ability to make contactless payments using their smartphone; the pilot of its digital hub for small banking customers called Business in One; and the launch of NAB Dash aimed to streamline the consumer-merchant experience.

In addition, the bank rolled out its Personal Banking Organisation Platform (PBOP) across South Australia, the Northern Territory, and Western Australia.

In February, NAB committed to rolling out its PBOP nationally by the end of the year, which the company said would be the final piece to its Nextgen technology transformation and the "biggest technology overhaul in the bank's history".

The rollout follows a pilot of the platform that commenced in August 2015 in contact centres in the Northern Territory and South Australia. During the pilot, the company said more than 9,000 transaction accounts, 4,000 credit cards and personal loans, and 700 home loans were opened.

The bank worked with technology partner Oracle to deliver the platform. Oracle has previously been responsible for helping the bank deliver NAB View and Credit Risk Engine.

"This technology enables our customers to track applications online and receive SMS or email updates at key milestones. Our 2016 national rollout remains on track," Thorburn said.

As a result of the company's focus on its PBOP, NAB reported fewer funds were spent on the Oracle Banking platform. In turn, this impacted overall investment spend, which is expenditure on projects designed to enhance the customer experience. For the half year, investment spend was AU$476 million, a decrease of 1.7 percent against March 2015 half year.

Investment in infrastructure projects also decreased by AU$98 million to AU$206 million, with NAB saying it was due to significant progress made to its transformation agenda, including completing its new datacentre and upgrading its network and infrastructure.

For the six months, the bank also posted a 4.2 percent increase in expenses to AU$3.8 billion, which NAB said reflects the group's investment in priority customer segments, and an increase in technology and personnel costs.

Capitalised software balance rose AU$95 million to $2.1 billion as the group continued to invest in software to support its customer-focused objectives. Some of the major software investments were part of the PBOP deployment, as well as regulatory compliance initiatives and enhancing the digital capabilities of the Australian banking franchise.

Intangible assets, which comprises capitalised software and other intangible assets, increased by 4.7 percent compared to the September 2015 half year. This increase was attributable to the continued investment in the transformational agenda in March 2016 half year, along with efficiency and compliance projects, partially offset by an increase in amortisation, the bank said.