The National Australia Bank Ltd (ASX: NAB) share priced declined today after ASIC started legal proceedings against the big four ASX bank.
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. It also operates the online-only Ubank.
Why Is ASIC Targeting NAB?
Australian Securities and Investments Commission (ASIC) has today commenced legal proceedings against NAB because of the NAB Introducer Program.
NAB Chief Legal and Commercial Counsel Sharon Cook explained the situation:
“ASIC’s civil proceedings against NAB allege contraventions of section 31 of the National Consumer Credit Protection Act (Credit Act) in relation to 297 loan applications between 2013 and 2016. ASIC claims that by receiving information from introducers that went beyond their limited remit of ‘spot and refer’, NAB breached the Credit Act.
“We take this legal action seriously and will now carefully assess the allegations. Throughout the Royal Commission we heard clearly that our actions need to change to meet the expectations of our customers and the community.
“That’s why in March this year we announced we would be ending referral payments to introducers. We also established a remediation program in November 2017 to assist impacted customers.”
What Will This Mean For NAB?
It’s too early to tell what’s going to happen with this legal case, it will take a long time.
The Royal Commission has been a very painful experience for all of the big banks of NAB, Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) with hundreds of millions of dollars going back out of the door.
NAB certainly has an attractive fully franked dividend yield of 6%, but if arrears and bad debts keep rising I’m not confident about NAB’s shorter term profit. I’d rather buy shares of the reliable businesses in the free report below.
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