The National Australia Bank Ltd (ASX: NAB) share price is edging higher on Friday despite announcing new provisions and impairments.
At the time of writing, the NAB share price is up almost 0.5% to $19.48.
What did NAB announce?
This morning the banking giant announced a number of items that will impact its upcoming second half results and a change in the reporting of its Wealth business.
According to the release, the bank’s second half earnings will be reduced by a net increase in provisions and impairments of $642 million.
The biggest contributor to this is customer-related remediation matters of $380 million before tax. This equates to $266 million after tax. These provisions comprise $245 million before tax for Wealth-related matters and $135 million before tax for Banking-related matters.
Management advised that this relates to non-compliant advice provided to Wealth customers, adviser service fees charged by NAB Financial Planning, and a higher allowance for ongoing liabilities associated with the existing Wealth remediation program.
In addition to this, NAB is recording a net increase in payroll remediation provisions of $128 million before tax. This follows a previously announced review that identified a range of potential payroll under and over payments issues.
Finally, NAB revealed an impairment of property-related assets of $134 million before tax. This primarily relates to plans to consolidate NAB’s Melbourne office space. This follows the bank’s plan for more colleagues to adopt a flexible and hybrid approach to working over the longer term. This includes a mix of working remotely and in offices for the purposes of collaboration, planning, and creating the right culture.
Management advised that the provisions and impairment are expected to reduce its Common Equity Tier 1 capital (CET1) ratio by approximately 15 basis points.
Wealth changes.
NAB has also announced a change in its Wealth reporting ahead of its results release.
Following the agreed sale of 100% of its MLC Wealth business to IOOF Holdings Limited (ASX: IFL), all earnings associated with MLC Wealth will transfer to Discontinued Operations.
Though, it notes that the completion of the sale remains subject to certain conditions, including regulatory approvals.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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