--NAB to cut A$800 million from annual costs by 2018
--Bank to merge technology, reduce office space
--Shares drop
(Adds CEO comments from fourth paragraph, investor remarks in
sixth.)
By Caroline Henshaw
SYDNEY--National Australia Bank Ltd. (NAB.AU) Wednesday
announced cost savings and a shake-up of senior management as it
seeks to appease investors disappointed by its last annual earnings
result.
Australia's fourth-largest lender by market value said it would
seek to shave 800 million Australian dollars (US$826 million) from
annual costs by 2018. The savings would come through merging
technology, centralizing administrative roles and reducing the size
of branch offices by a quarter.
NAB said it would also increase its focus on new pension-related
services, as well on businesses that trade with Asia and people
who've migrated to Australia from the region.
"The external landscape is changing whether we like it or not
and we need to react to that," said Cameron Clyne, chief executive
of the bank, whose main overseas exposure is to the troubled U.K.
economy.
Some equity analysts said the cost of enforcing the changes
could mean that NAB's expenses initially rise faster than its
income--potentially hurting fiscal 2013 earnings. According to
Goldman Sachs analysts, despite the planned IT changes NAB's
technology would still lag that of its larger rival, Commonwealth
Bank of Australia (CBA.AU), by as much as four years.
Mark Nathan, a managing partner at Arnhem Investment Management
Partners who owns NAB shares, said sharp cost savings had already
been priced into the market and would be unlikely to ease
shareholder concern that NAB is less profitable than its peers. NAB
shares fell as much as 2.7% after the update.
"The market wants to see some delivery at the bottom line," Mr.
Nathan said. "We want evidence of change rather than talk about
change."
Mr. Clyne launched a review of NAB's business after its
struggling U.K. banks dragged profit down by A$1 billion last
fiscal year. The slump in earnings at a time when Australia's other
major banks were reporting record results triggered a backlash from
investors, who lodged a protest vote against Mr. Clyne and other
senior executives' pay at the bank's annual general meeting in
December.
Mr. Cameron defended the bank's strategy, including a plan to
restructure the loss-making Clydesdale and Yorkshire banks instead
of opting for "the shorter route" of a sale that he said would hurt
shareholders.
Separately Wednesday, NAB announced a raft of changes to senior
management. Executive Director of Finance, Mark Joiner, who also
faced criticism from investors at the AGM, will retire by the end
of the year.
Steve Tucker, head of the bank's Wealth division, will be
replaced by Andrew Hagger, currently group executive for marketing
and communications, after 25 years with the company.
Write to Caroline Henshaw at caroline.henshaw@wsj.com
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