NAB profit drops to AU$4.8b as its virtual assistant takes on more load

The bank is two-thirds way through its digital transformation that is slated to cut staffing numbers by 4,000.

National Australia Bank (NAB) has reported a 13.6% drop in its statutory profit to just shy of AU$4.8 billion, in what its interim CEO Philip Chronican has called a challenging year.

For the 2019 financial year, the red and black bank posted cash earnings of AU$5 billion -- down 10.6% compared to last year. Business and private banking contributed the most, accounting for AU$2.8 billion of its reported earnings.

NAB is currently two years into its three-year transformation, which will eventually see 4,000 staff leave the bank by its completion. The bank expects to see over AU$1 billion in cost savings as a result of the job losses and other cost and productivity initiatives that shape the transformation plan.

NAB has also shuttered 95 branches and banking centres during the year.

The bank's virtual assistant and live chat functions, meanwhile, has picked up steam, completing over 20,000 customer queries and conducting more than 9,000 chats per month.

It touted that since August 2018, 460,000 customer queries have been responded to by a virtual assistant.

"Our transformation is delivering productivity benefits, allowing us to absorb higher spend to strengthen the compliance and control environment while also investing in our business," Chronican said.

The interim CEO said NAB has been implementing more robust systems and processes to support its shift to digital.

The bank also boasted that 66% of its customers now use exclusively digital, with 657 million mobile app logins having been performed during the year. After introducing Apple Pay in May, NAB said it has experienced "high levels" of adoption of the iPhone wallet.

Read also: Banking cartel calls Apple Pay alternatives 'unrealistic' in Australian market

Touching on the bank's in-app customer experience, it said in 2016, users had to wait five days for transactions to appear; in 2019, the wait is now five seconds.

"We are now over two years into our three-year transformation. Our AU$1.5 billion targeted additional investment over three years is delivering better outcomes for all our stakeholders," Chronican said.

"Since the transformation started in September 2017, our focus on becoming simpler, faster, and less complex for customers and employees has resulted in 30% fewer products, 30% less over-the-counter transactions, and a 17% decrease in calls to our call centres.

"Over this same period the number of IT legacy applications reduced by 11% while 19% of current IT applications were migrated to more reliable, lower cost cloud platforms."

The bank also reduced legacy IT applications by 278 since FY17 -- 86 of which were cut during the second half of the 2019 financial year. Of the 422 applications migrated to the cloud, 224 took place in 2H19.

The bank also plans on shifting a few hundred apps to the Amazon Web Services (AWS) cloud and adding Google Cloud to its multi-cloud strategy that also comprises of services from Microsoft Azure. 

NAB said the cloud has resulted in a more productive workforce, allowing development in two days, down from an average of six weeks.

More than 25,000 reports and 16 reporting tools were also decommissioned during the year.

NAB said it has also realised AU$319 million in savings from third party spend since FY17.

Since the last results announcement, the bank's data lake has become operational, with 106 core data feeds already in production and plans for over 700 billion data points to be added per week. Its data lake is touted as cloud-based, scalable, and containing structured and unstructured data that is all encrypted at rest and in transit.

The NAB discovery cloud is currently in use by over 300 of the company's staff, enabling predictive analytics and personalised customer communications, it said.

In 2014, NAB experienced 40 issues classed as critical; in 2019, this number was reduced to zero. It said investment in technology was driving lower instances of technology incidents.

The time to detect cybersecurity incidents and time to contain were "down 12-fold" and "down 8-fold", respectively, in FY19.

During the year, the bank also introduced a new technology leadership team and completed the rollout of 835 Smart ATMs.

Meanwhile NAB Ventures, the bank's corporate venture capital fund, experienced its first exit in 2019, with taxation firm H&R Block scooping up Wave Financial for AU$583 million. It also tracked 2,800 startups and made three new investments and five follow-ons.

In the aftermath of the Banking Royal Commission, NAB has more than 950 people dedicated to remediating customers and in FY19 recognised additional charges of AU$1.1 billion after-tax for customer-related remediation

Of the 76 recommendations made after the Royal Commission, NAB said 39 are currently capable of being addressed by NAB, having completed five, with 34 in progress.

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