Is the National Australia Bank Ltd (ASX: NAB) share price a buy after its top officials were criticised in the Royal Commission Report by Commissioner Hayne?
NAB is one of the four largest financial institutions in Australia in terms of market capitalisation, earnings and customers. However, in 2018, it was Australia’s largest lender to businesses and has operations in wealth management and residential lending.
What was the Royal Commission criticism?
NAB was one of the main focuses of the Royal Commission inquiries. The business-focused bank as a whole did not receive any more blame than its peers of Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Group (ASX: WBC).
However, the NAB Chairman Dr Ken Henry and the NAB CEO Mr Andrew Thorburn were heavily criticised by Commissioner Hayne, he said he was not as confident as he wishes to be that the lessons of the past have been learned.
Commissioner Hayne said that Dr Henry seemed unwilling to accept any criticism of how the NAB board dealt with issues and that the NAB CEO treated all the issues of fees for no service as “nothing more than carelessness combined with system deficiencies when the total amount to be repaid by NAB and NULIS…is likely to be more than $100 million.”
Finally, Commissioner Hayne summarised his thoughts on NAB, “Overall, my fear – that there may be a wide gap between the public face NAB seeks to show and what it does in practice – remains.”
Most of the large ASX entities affected by the Royal Commission have issued initial responses, including NAB.
Aside from praising the report for the change it will bring and make the banking sector better for customers, the NAB officials also responded to the direct criticisms. As you can imagine, NAB’s officials wanted to respond.
NAB CEO Mr Thorburn said: “As the CEO, this is very hard to read, and does not reflect who I am or how I am leading, nor the change that is occurring inside our bank.
“While we have made mistakes, I believe there is a lot of evidence that we are making sustainable and serious change to once again regain the trust of all of our customers.”
Mr Thorburn has been on long service leave for a while, but he announced he has cancelled the leave and will lead NAB to be better for customers.
Chairman Dr Henry said: “I am disappointed that the Commissioner formed this view. I know it is not so. The Board and I have reflected deeply on those and other issues and, as I have said previously, we take them very seriously.
Dr Henry said the Board is looking at the whole bank and is the only bank to publicly release its assessment.
If only they had made these sort of responses in the Royal Commission, not after the report had been released showing criticism of them.
Is the NAB share price a buy?
Investors seem to think so, the NAB share price is up 2.8% in early trade. It was particularly pleasing for shareholders that the Commissioner didn’t recommend that the banks have to do more lending checks.
NAB currently offers a fully franked dividend yield of 8%. This seems very good if it can be maintained over the long term, but there’s no guarantee of that. I believe NAB shares are more attractive than they were yesterday, but I wouldn’t call them a buy yet.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).