1 00:00:05,880 --> 00:00:07,920 Speaker 1: Welcome to Fearing, Greed, Q and A, where we ask 2 00:00:07,960 --> 00:00:11,600 Speaker 1: and answer questions about business, investing, economics, politics and more. 3 00:00:11,640 --> 00:00:15,880 Speaker 1: I'm Sean Almer. Australia's second largest lender, National Australia Bank, 4 00:00:15,880 --> 00:00:18,880 Speaker 1: reported its full year earnings yesterday, making a cash profit 5 00:00:18,880 --> 00:00:21,400 Speaker 1: of seven point one billion dollars, slightly lower than the 6 00:00:21,440 --> 00:00:24,680 Speaker 1: previous year. Broadly in the bank's key focus areas of 7 00:00:24,760 --> 00:00:28,560 Speaker 1: deposit taking, business lending and driving growth in homelans via 8 00:00:28,600 --> 00:00:31,640 Speaker 1: its own channels as opposed to mortgage brokers. NAB did 9 00:00:31,680 --> 00:00:34,519 Speaker 1: pretty well, although its share price was sold off to 10 00:00:34,560 --> 00:00:37,320 Speaker 1: take us through what NAB is seeing, particularly in the economy. 11 00:00:37,360 --> 00:00:40,800 Speaker 1: I welcome Chief executive Officer Andrew Irvine. Andrew, Welcome to 12 00:00:40,840 --> 00:00:41,800 Speaker 1: Fear and Greed A. 13 00:00:42,040 --> 00:00:43,520 Speaker 2: Thanks for having me on the show. Sean. 14 00:00:43,720 --> 00:00:46,400 Speaker 1: What's your take on interest rates? Two parts to that? 15 00:00:46,720 --> 00:00:49,560 Speaker 1: Should the Reserve Bank cut rates again? And will lay 16 00:00:49,560 --> 00:00:51,600 Speaker 1: cut rates again? Look? 17 00:00:51,640 --> 00:00:54,840 Speaker 2: I think right now the three rate cuts that the 18 00:00:54,880 --> 00:00:57,120 Speaker 2: Bank has done over the course of the year has 19 00:00:57,120 --> 00:01:02,240 Speaker 2: had the desired effect. The economy forecast to grow two 20 00:01:02,280 --> 00:01:06,000 Speaker 2: percentage points in twenty twenty five, rising to two point 21 00:01:06,040 --> 00:01:10,559 Speaker 2: three percent in twenty six. Employment levels are strong. Assets 22 00:01:10,800 --> 00:01:15,440 Speaker 2: prices are increasing, both residential housing as well as commercial property, 23 00:01:15,920 --> 00:01:18,200 Speaker 2: and so you know, I think you have an economy 24 00:01:18,200 --> 00:01:22,560 Speaker 2: that's performing reasonably well. So the Reserve Bank has two goals. 25 00:01:22,600 --> 00:01:26,520 Speaker 2: One is to manage inflation to a target setting and 26 00:01:26,560 --> 00:01:30,000 Speaker 2: the other one is to sustain full employment. And so 27 00:01:30,200 --> 00:01:33,280 Speaker 2: I think actually was the right decision to not decrease 28 00:01:33,360 --> 00:01:36,560 Speaker 2: rates because the economy is performing quite well. So you know, 29 00:01:36,640 --> 00:01:38,960 Speaker 2: our forecast right now is that rates are going to 30 00:01:39,000 --> 00:01:42,080 Speaker 2: stay at this level for at least something like till 31 00:01:42,120 --> 00:01:44,080 Speaker 2: May of next year, but. 32 00:01:44,160 --> 00:01:45,480 Speaker 1: There might be another cut. 33 00:01:46,240 --> 00:01:49,440 Speaker 2: There's a decent possibility of another cut. I wouldn't bank 34 00:01:49,520 --> 00:01:52,320 Speaker 2: on more than one more really, but I think the 35 00:01:52,360 --> 00:01:55,400 Speaker 2: possibility of one more cut in that time of year 36 00:01:56,000 --> 00:01:58,600 Speaker 2: is good. What we need to see, though, is inflation 37 00:01:59,000 --> 00:02:00,000 Speaker 2: continue to come down. 38 00:02:00,520 --> 00:02:03,320 Speaker 1: What do you think National Austraining Bank the biggest leander 39 00:02:03,400 --> 00:02:07,480 Speaker 1: to business and particularly small businesses. How are small businesses 40 00:02:07,520 --> 00:02:10,840 Speaker 1: traveling at the moment, let's make it small and medium 41 00:02:10,840 --> 00:02:11,600 Speaker 1: sized businesses. 42 00:02:12,080 --> 00:02:15,840 Speaker 2: I think they're doing well. In our latest survey, both 43 00:02:15,880 --> 00:02:19,840 Speaker 2: business confidence and business conditions improved and they're at the 44 00:02:19,919 --> 00:02:24,040 Speaker 2: highest level in about three years. So again I think 45 00:02:24,040 --> 00:02:28,640 Speaker 2: that's promising. You're seeing cash flow pressures both at the 46 00:02:28,680 --> 00:02:33,040 Speaker 2: household level as well as in small and medium businesses ease, 47 00:02:33,800 --> 00:02:37,639 Speaker 2: and you know things are getting better, it's not in 48 00:02:37,680 --> 00:02:41,560 Speaker 2: all cases. If I look at our mortgage customers, eighty 49 00:02:41,600 --> 00:02:44,960 Speaker 2: percent of our customers chose to keep their repayments at 50 00:02:44,960 --> 00:02:48,240 Speaker 2: the same level despite the three rate cuts, So in effect, 51 00:02:48,240 --> 00:02:53,480 Speaker 2: they're paying down the mortgage sooner and availed themselves of 52 00:02:53,520 --> 00:02:56,880 Speaker 2: the lower payments because you know, they maybe needed that 53 00:02:57,240 --> 00:03:00,720 Speaker 2: to manage their household budgets. So you know, that would 54 00:03:00,760 --> 00:03:03,120 Speaker 2: point to the fact that most of our customers are 55 00:03:03,120 --> 00:03:08,120 Speaker 2: actually managing and managing quite well. I think what small 56 00:03:08,160 --> 00:03:11,760 Speaker 2: businesses tell me when we speak to them is they 57 00:03:12,000 --> 00:03:15,960 Speaker 2: are worried about energy and the costs of energy, especially 58 00:03:16,080 --> 00:03:21,160 Speaker 2: where they're high consumers of gas or electricity in say manufacturing, 59 00:03:21,240 --> 00:03:23,840 Speaker 2: So that's worrying them. And then the other thing they 60 00:03:24,000 --> 00:03:28,360 Speaker 2: say routinely is we need to continue to focus on 61 00:03:28,440 --> 00:03:32,880 Speaker 2: reducing complexity, getting rid of red tape for businesses, particularly 62 00:03:32,919 --> 00:03:33,760 Speaker 2: small businesses. 63 00:03:34,360 --> 00:03:36,520 Speaker 1: Okay, with all that is background, your credit and payment 64 00:03:36,600 --> 00:03:39,640 Speaker 1: charge in business lending did increase. Was that because of 65 00:03:39,680 --> 00:03:43,360 Speaker 1: something specific or I'm just trying to marry that with 66 00:03:43,360 --> 00:03:44,400 Speaker 1: what you've just said. 67 00:03:44,840 --> 00:03:50,240 Speaker 2: Yeah, we've been clear all along that we expected the 68 00:03:50,280 --> 00:03:55,960 Speaker 2: peak of delinquency in our books to be in housing 69 00:03:56,080 --> 00:03:59,640 Speaker 2: in the first half of the year and in business 70 00:03:59,680 --> 00:04:02,680 Speaker 2: in the second half of the year. The reason for 71 00:04:02,720 --> 00:04:06,320 Speaker 2: that is sometimes stress takes a little bit longer to 72 00:04:06,400 --> 00:04:09,160 Speaker 2: eventuate in a business than it does in the household. 73 00:04:09,480 --> 00:04:13,400 Speaker 2: So we see things playing out exactly as we expected 74 00:04:13,400 --> 00:04:17,760 Speaker 2: it to play out. Our forward looking delinquency indicators have 75 00:04:17,880 --> 00:04:21,560 Speaker 2: now either started to fall or they're reducing at the 76 00:04:21,600 --> 00:04:24,360 Speaker 2: slowest rate in the last three years, and so both 77 00:04:24,400 --> 00:04:28,279 Speaker 2: of those would point to improvement in the credit cycle 78 00:04:28,560 --> 00:04:34,640 Speaker 2: from here on in. What's sometimes hard to predict is impairments, 79 00:04:34,680 --> 00:04:37,320 Speaker 2: because you can have a handful of single name impairments 80 00:04:38,279 --> 00:04:41,919 Speaker 2: that can change things period to period. But from a 81 00:04:41,960 --> 00:04:46,040 Speaker 2: delinquency perspective, we are optimistic that this is the peak 82 00:04:46,080 --> 00:04:46,719 Speaker 2: of the cycle. 83 00:04:47,200 --> 00:04:49,440 Speaker 1: Can we just quickly you sort of inferred that things 84 00:04:49,480 --> 00:04:51,760 Speaker 1: were looking better at the household sectary the cost of 85 00:04:51,760 --> 00:04:55,120 Speaker 1: living crisis. The Reserve banks suggested that has peaked. That 86 00:04:55,160 --> 00:04:57,800 Speaker 1: doesn't necessarily mean that people are having a great time 87 00:04:57,839 --> 00:05:00,640 Speaker 1: out there. What's anab's view on the cross of in crosses, 88 00:05:00,680 --> 00:05:03,880 Speaker 1: has it peaked? Will things start to get better. Well. 89 00:05:04,080 --> 00:05:09,080 Speaker 2: According to our numbers, hardship applications peaked at the back 90 00:05:09,200 --> 00:05:12,479 Speaker 2: end of last year actually, and they've come down over 91 00:05:12,480 --> 00:05:16,320 Speaker 2: the course of this year. We see our deposit balances 92 00:05:16,360 --> 00:05:20,640 Speaker 2: in our customer's accounts increasing. Our household deposit balance is 93 00:05:20,680 --> 00:05:24,080 Speaker 2: increased by like I think eight or nine percent this year, 94 00:05:24,080 --> 00:05:28,000 Speaker 2: which is very material, and that's our customer's money. So 95 00:05:28,040 --> 00:05:32,400 Speaker 2: that would suggest that households are by and large managing 96 00:05:32,800 --> 00:05:36,000 Speaker 2: things well. Obviously we're a big country, and there are 97 00:05:36,040 --> 00:05:41,039 Speaker 2: regional variations, there are demographic variations, and there are certainly 98 00:05:41,080 --> 00:05:44,120 Speaker 2: households out there that are still continuing to do it tough. 99 00:05:44,600 --> 00:05:47,000 Speaker 2: And what I'd say to anyone in that situation is 100 00:05:47,040 --> 00:05:48,560 Speaker 2: the best thing you can do is give us a 101 00:05:48,560 --> 00:05:50,919 Speaker 2: call and see how we can best work with you 102 00:05:51,520 --> 00:05:52,680 Speaker 2: to help you get by. 103 00:05:53,240 --> 00:05:55,400 Speaker 1: Okay, moving away from the economy is one hundred and 104 00:05:55,440 --> 00:05:58,200 Speaker 1: thirty million dollar cost of payroll review and remediation. You 105 00:05:58,240 --> 00:06:01,320 Speaker 1: had come out with that already. Plenty of stories about 106 00:06:01,320 --> 00:06:04,440 Speaker 1: not just National Australia Bank, but retailers all sorts of 107 00:06:04,440 --> 00:06:08,800 Speaker 1: sectors really struggling to pay the right amount when there 108 00:06:08,800 --> 00:06:11,240 Speaker 1: are so many right, is it a problem with the system. 109 00:06:11,320 --> 00:06:13,560 Speaker 1: Is it a problem with the awards system that it 110 00:06:13,600 --> 00:06:16,360 Speaker 1: is so complex that even the big guys in US 111 00:06:16,480 --> 00:06:19,400 Speaker 1: certainly not alone in these it's just too. 112 00:06:20,920 --> 00:06:23,160 Speaker 2: Obviously, I came to Australia five years ago and I'd 113 00:06:23,240 --> 00:06:27,599 Speaker 2: never heard of payroll matters to the extent that we 114 00:06:27,720 --> 00:06:32,839 Speaker 2: have them here. And how we pay people here with 115 00:06:33,360 --> 00:06:37,640 Speaker 2: complicated EBAs that require all sorts of different types of 116 00:06:38,000 --> 00:06:41,480 Speaker 2: settings are clearly difficult, and not just for us, but 117 00:06:41,520 --> 00:06:44,240 Speaker 2: for everybody. Look at the end of the day that 118 00:06:44,240 --> 00:06:46,440 Speaker 2: that's the laws of the land and we need to 119 00:06:46,440 --> 00:06:49,960 Speaker 2: make sure that we pay our colleagues appropriately, properly and fairly. 120 00:06:50,520 --> 00:06:52,320 Speaker 2: But I think there is something to be said for 121 00:06:52,400 --> 00:06:55,520 Speaker 2: the fact that payroll is perhaps a little bit more 122 00:06:55,520 --> 00:06:59,240 Speaker 2: complicated in Australia than some other markets, and could that 123 00:06:59,279 --> 00:07:01,360 Speaker 2: be an area where we could simplify things. 124 00:07:02,279 --> 00:07:04,600 Speaker 1: You have an ambition to be the most customer centric 125 00:07:04,680 --> 00:07:08,320 Speaker 1: company in Australia. In New Zealand hard to judge, but 126 00:07:08,360 --> 00:07:11,080 Speaker 1: if you look at it promoter scores your consumer bank 127 00:07:11,080 --> 00:07:14,160 Speaker 1: in New Zealand's doing a great job. In Australia, you're 128 00:07:14,240 --> 00:07:16,240 Speaker 1: second behind another bank. You don't name who it is. 129 00:07:16,280 --> 00:07:17,560 Speaker 1: I'm going to throw it out there. It's just it's 130 00:07:17,560 --> 00:07:21,000 Speaker 1: Commonwealth Bank. How do you sorry that's in business in retail? 131 00:07:21,480 --> 00:07:24,640 Speaker 1: How do you compete with such a strong competitor. 132 00:07:27,000 --> 00:07:29,080 Speaker 2: It's not just a strong competitor. There are lots of 133 00:07:29,120 --> 00:07:32,160 Speaker 2: strong competitors out there, and we compete against all of them. 134 00:07:32,640 --> 00:07:38,840 Speaker 2: For us, what we're focused on is about improving our experiences. 135 00:07:38,880 --> 00:07:42,440 Speaker 2: As we've identified twenty must win battles. We're focused on 136 00:07:42,760 --> 00:07:46,920 Speaker 2: significantly increasing the amount of customer feedback where we listen, 137 00:07:47,040 --> 00:07:49,880 Speaker 2: learn and act as a result of that feedback. And 138 00:07:50,000 --> 00:07:51,880 Speaker 2: our view is that, you know, we want to be 139 00:07:51,920 --> 00:07:55,840 Speaker 2: the Toyota of banking, which is a listing organization that 140 00:07:56,000 --> 00:07:58,920 Speaker 2: is constantly improving how we show up day in and 141 00:07:59,000 --> 00:08:02,600 Speaker 2: day out, and no one does that in this industry. 142 00:08:03,120 --> 00:08:05,800 Speaker 2: You know, we have lots of other banks that are 143 00:08:05,840 --> 00:08:11,560 Speaker 2: focused on innovation and features and functions, but who is 144 00:08:11,600 --> 00:08:13,960 Speaker 2: out there trying to improve their business day in and 145 00:08:14,040 --> 00:08:18,280 Speaker 2: day out based on what customers experience. And you know, 146 00:08:18,360 --> 00:08:22,520 Speaker 2: we've highlighted that we're already now implementing changes in our 147 00:08:22,560 --> 00:08:26,520 Speaker 2: bank based on customer feedback in the hundreds and I 148 00:08:26,520 --> 00:08:28,800 Speaker 2: would like to see that over time in the thousands 149 00:08:28,840 --> 00:08:31,880 Speaker 2: and ultimately in the tens of thousands. And if we 150 00:08:31,920 --> 00:08:34,040 Speaker 2: do that, and we do that really, really well, I 151 00:08:34,080 --> 00:08:36,560 Speaker 2: think customers are going to enjoy banking with us more 152 00:08:37,040 --> 00:08:39,160 Speaker 2: and hopefully we'll bring more of their business to us. 153 00:08:39,720 --> 00:08:41,559 Speaker 1: Is that your biggest challenge? 154 00:08:41,880 --> 00:08:44,840 Speaker 2: Look, I believe profoundly in the fact that if we 155 00:08:44,920 --> 00:08:48,640 Speaker 2: look after our customers well that they will bring more 156 00:08:48,679 --> 00:08:51,440 Speaker 2: business to us. They're less likely to attry, and they're 157 00:08:51,440 --> 00:08:54,240 Speaker 2: more likely to refer friends and family. So you know, 158 00:08:54,280 --> 00:08:58,360 Speaker 2: I don't want to over comp overcomplicate banking. Let's do 159 00:08:58,440 --> 00:09:03,120 Speaker 2: the basics well, focus on our customers, helping them manage 160 00:09:03,160 --> 00:09:06,560 Speaker 2: their financial lives, either in business or in personal banking. 161 00:09:07,000 --> 00:09:08,880 Speaker 2: And if we do that well, we'll be right. 162 00:09:09,800 --> 00:09:12,880 Speaker 1: You've been in the job for eighteen months, means you're 163 00:09:12,880 --> 00:09:15,240 Speaker 1: almost a veteran of big banks ce as you're the 164 00:09:15,280 --> 00:09:19,400 Speaker 1: second longest serving. You've received plenty of media, not always 165 00:09:19,679 --> 00:09:23,320 Speaker 1: probably welcome. What's it like running a big bank? What's 166 00:09:23,520 --> 00:09:25,520 Speaker 1: if you enjoyed it? Is it what you expected to 167 00:09:25,600 --> 00:09:26,400 Speaker 1: be harder? 168 00:09:28,280 --> 00:09:30,840 Speaker 2: If I had to characterize it in a sentence, I'd 169 00:09:30,840 --> 00:09:32,680 Speaker 2: say it's the best and worst job in the world. 170 00:09:32,720 --> 00:09:36,480 Speaker 1: At the same time, you have to give me another 171 00:09:36,520 --> 00:09:37,360 Speaker 1: sentence after that. 172 00:09:37,960 --> 00:09:40,400 Speaker 2: Look, there's a lot of what I do that gives 173 00:09:40,440 --> 00:09:43,160 Speaker 2: me real pride. You know, I work with forty thousand 174 00:09:43,240 --> 00:09:47,640 Speaker 2: incredible colleagues, helping over a million businesses and over ten 175 00:09:47,679 --> 00:09:54,280 Speaker 2: million Australians to you know, buy homes, buy businesses, grow businesses, 176 00:09:54,559 --> 00:10:00,560 Speaker 2: save for their retirement. And that's an incredible privilege. Obviously 177 00:10:01,080 --> 00:10:07,080 Speaker 2: it comes with, you know, stresses and scrutiny and responsibility. 178 00:10:07,960 --> 00:10:12,840 Speaker 2: All leadership roles come with responsibility, and you know that's 179 00:10:12,880 --> 00:10:14,880 Speaker 2: something that I'm really clear on. 180 00:10:15,320 --> 00:10:16,960 Speaker 1: Andrew, thank you for talking to Fear and Greed. 181 00:10:17,160 --> 00:10:18,240 Speaker 2: Thanks for having me on the show. 182 00:10:18,400 --> 00:10:20,800 Speaker 1: That was Andrew Bermine, CEO of National Australia Bank. If 183 00:10:20,840 --> 00:10:22,760 Speaker 1: you've got something you'd like to know, send your question 184 00:10:22,880 --> 00:10:26,160 Speaker 1: via LinkedIn, Instagram, Facebook, or at Fearing Greed dot com 185 00:10:26,200 --> 00:10:29,440 Speaker 1: dot au. I'm Schanoma and this is Fearing Greed Q 186 00:10:29,600 --> 00:10:29,760 Speaker 1: and a