Technology investments drive operating expenses up for NAB

National Australia Bank reported that higher technology costs were incurred during the first half of the 2015 financial year as it continued to make investments in its digital channels.
Written by Aimee Chanthadavong, Contributor

National Australia Bank (NAB) has said its digital channels helped drive sales and services during the half year of the 2015 financial year.

NAB, which lifted its first-half profit by 5.4 percent and will tap investors for AU$5.5 billion as it prepares to float its troubled UK business, said its investment in technology priorities saw customers continue their migration to digital self-service banking.

During the first half, the bank recorded that 72 percent of total transactions were via a digital channel. Of the 72 percent, 49 percent were via the bank's internet banking platform, while 23 percent were via the NAB mobile app.

The bank added that the technology investments it made resulted in completing the rollout of NAB View for its business banking segments. NAB View provides its bankers in NAB business, agriculture, health, and private wealth with a full view of approximately 135 million customer records.

In January, the company also launched NAB Now for small business customers, to enable them to make a sale anytime, anywhere, while accepting card payments from smartphones and tablets.

In light of these investments, NAB reported that operating expenses during the first-half reached AU$4,460 million, up from AU$4,262 million the previous quarter. NAB attributed this to higher technology costs.

NAB made a cash profit of AU$3.32 billion for the six months to March 31, which is slightly below the AU$3.36 billion analysts had expected.

Meanwhile, its shares have been placed in a trading halt as the bank launches an entitlement offer that is expected to raise AU$5.5 billion.

Chief executive Andrew Thorburn said the raising would be used to facilitate an initial public offering (IPO) of shares in its UK operations, which include Clydesdale Bank, by the end of 2015.

"In relation to exiting our UK banking business, we have been examining a broad range of options, including those provided by public markets," he said.

"It is a priority to exit this business, and we are today announcing our intention to pursue a demerger and IPO of the UK banking business."

The UK division has weighed on NAB's performance for many years, and it has been looking to exit the business for some time.

Thorburn said the float and capital raising would lift NAB's common equity tier 1 capital reserve ratio to 10 percent. He said that would position the bank for possible changes to capital reserve requirements from the Australian Prudential Regulation Authority.

The bank has also announced that former federal Treasury secretary Ken Henry will succeed outgoing NAB chairman Michael Chaney, who will retire at the bank's annual general meeting in December.

NAB will pay a fully franked interim dividend of 99 cents per share, unchanged from a year ago, which is at the lower end of analyst forecasts.

With AAP

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