NAB News

A message to NAB customers, investors, shareholders, employees and the community:

Today I have been advised by the Federal Treasurer that we will be asked to present to the House of Representatives Standing Committee on Economics.

I have indicated to the Treasurer I will accept the invitation to attend the Committee and discuss the way we balance the needs of all stakeholders, including borrowers, depositors, investors and shareholders.

We believe our key responsibility is to help people with important financial decisions and to build a stronger economy. We are committed to helping people buy a home, save for retirement, start and grow a business and in doing so create more jobs and opportunity.

In any business, big or small – indeed in government and organisations of different shapes and sizes – there is always a balance needed in all major decisions.

This is because businesses do not have unlimited resources, and because there are different stakeholders to be satisfied. The needs of these stakeholders need to be carefully balanced, in order to sustain their support over the long term.

A bank is no different, and indeed it has been my experience over 30 years in banking, that this balance is both vital and difficult.

The setting of interest rates requires this delicate balance because different stakeholders have different needs which include:

• our 970,000 mortgage customers and almost 170,000 business customers who have borrowings with us and who want competitive (lower) interest rates so they can buy their own home and grow their businesses;
• our 4.5 million retail and business deposit customers who have $320 billion on deposit with us and who also want competitive (higher) interest rates;
• We also have over $240 billion in wholesale funding, much of which is from overseas investors who have a range of global choices as to where they invest their funds;
• our 584,000 shareholders who have invested their “at risk” capital into the bank and want to know we have a clear and sustainable strategy, and that it is profitable, so that they can be confident about future dividends and our share price. All but a few hundred of these are retail shareholders – mums and dads, retirees and people who invest smaller amounts, but nevertheless their hard-earned savings;
• Among our largest shareholders are superannuation funds, representing the long-term savings of millions of people all across Australia who depend on their investments for retirement.

The decisions we are making every day are done in the context of an uncertain international economic environment, in a highly-competitive marketplace, where the bank is subject to significant regulation and where there is major transparency of our operations (our annual report and quarterly performance updates are testament to this).

There are a lot of people who rely on us getting the balance of these decisions right, including our 35,000 staff.

So, coming back to the question of how we set our interest rates this week. We have been paying more to both depositors and investors over the past six months and we set a rate for mortgage customers that reflected the balance between all our stakeholders.

If we don’t get this right, it is inevitable we will lose business, and become a less competitive bank.

We look forward to the dialogue around how we balance these important themes – the delicate balance between different stakeholders; outlining the full cost of being an unquestionably strong bank; and bringing further insight to the topic of how we set our interest rates.

I am proud to be a banker. It has always required carefully thought through decisions, but the focus has been on serving the many people who rely on us to get these decisions right.

Yours sincerely

Andrew Thorburn
CEO, NAB