NAB CEO Andrew Thorburn – Interview with 3AW’s Neil Mitchell



NEIL MITCHELL: Mr Thorburn, good morning.

ANDREW THORBURN: Good morning Neil. It’s good to be back.

MITCHELL: Yeah, thank you for coming in. Last time you were here we were doing animal impressions.

THORBURN: [Laughs] No more, please.

MITCHELL: I’ve had a few callers asking about payWave – is there an additional fee – in fact, there’s a caller on the line about it now. Dan, yes Dan, go ahead.

CALLER DAN: Morning. PayPass is advertised as quick and convenient, but more than one place add a surcharge if you try to use it. So how much is charged from it, because to charge 20 cents just for using PayPass seems a bit over the top?

MITCHELL: Yeah, I must say I use it. I’ve got in the habit of using it a lot. Is there a fee from the bank, or is that the retailer?

THORBURN: No, that’s actually the merchant, Dan. So, from the bank’s perspective, payWave is obviously really convenient for our clients, because you can tap and go. And so there’s no transaction fee from the bank, but what the- the bank obviously recovers those costs through the merchant, through the small business. So they do have the option to charge an additional fee.

MITCHELL: Okay, so let me get that clear. The merchant’s charging the fee. Is the bank charging the merchant an extra fee to use payWave?

THORBURN: No, so the merchant services terminal, which is obviously crucial for a retailer today- I mean, there’s obviously a lot of infrastructure and security and technology around that, and obviously there’s a charge for the bank to the retailer for that. They pay that to us. There’s no additional charge that we put to them because they use payWave. They just decide whether they want to or not charge the end customer an initial fee.

MITCHELL: The Victorian Government’s looking at using the equivalent of payWave with a credit card – it was reported – on the public transport system. Are you part of that as yet or not?

THORBURN: No, I don’t know of that one, Neil, but we work a lot with the Victorian Government, obviously, being a Melbourne-based bank.

MITCHELL: Well, maybe it’s some years down the track by sounds of it.

THORBURN: So no more myki cards?

MITCHELL: No, that’s right. That’d be a good thing, in my view.

Infrastructure. An Infrastructure Australia report today really says we’re mucking it up. There’s problems with traffic, there’s problems with accommodation, there’s problems with the city growing. Melbourne and Sydney in particular are headed for trouble. What’s your view of that?

THORBURN: Well look, I think in Australia there are two or three really big issues that we need to face for the next decade, and I think this is one of them. Because you look at Melbourne and Sydney in particular: the gridlock; the inadequate public transport; the time it takes for people to drive from A to B across our city. As the city grows, we haven’t got enough quality accommodation, schools, broadband.

I mean, this is a really big issue, so I think it’s a big issue, and what it needs is a long-term plan between various bodies: state and federal government, banks, infrastructure providers and major financiers outside the banks. It needs to be a real long-term team effort to crack …

MITCHELL: [Interrupts] What sort of role for banks in that?

THORBURN: Well, banks play a huge role, because we are skilful at bringing money to the table with long-term projects and making sure they’re structured right so that they can be affordable over a long period of time. So that’s the skills we bring. Obviously, the state government brings- they have the planning and resource controls, and then you get the infrastructure providers who actually build the roads, build the school, so you need a partnership between two or three groups, but it needs to be one plan and a long-term plan.

MITCHELL: Well, what happens if we don’t get it right? Where are we going?

THORBURN: Well, I think you’re going to end up with- there are a lot of cities, particularly in places like the US, maybe London, where it’s like beyond repair in a way, because you go to Sydney now, and up George Street they’re putting in light rail – which is great – but of course, the disruption for a period of time is huge. So you get to a point where it’s almost unfixable because it’s like spaghetti, and I think what will happen is that’ll cause a lot of loss of productivity and a lot of stress for people, a lot of wasted time. And I think we should do this anyway. You think of Melbourne – Bendigo, Ballarat, Geelong: they should be major hubs now for us to think of 20-year plans. So I think the other thing is it’ll spill over into cities like that that they need to have long-term plans as well.

MITCHELL: Do you encourage people to work at home to avoid traffic?

THORBURN: Yes we do. We have a- we try to provide remote technology so that people can, through laptops or video conferencing- and that’s being enhanced at a rapid rate.

MITCHELL: I don’t like that. Do you?

THORBURN: Well, no, I think- the main thing is that where you’re working on intense projects, people need people contact. You need them in a room where you can feel the tone of voice and you can make decisions more effectively, but I think remote technology is crucial, especially in a country the size of Australia. I think many banking services in remote parts of Australia are going to rely on this sort of technology in the future.

MITCHELL: There’s a political debate going on about the future of the West Gate Tunnel, where the Opposition and the Greens are threatening to block it and we’re told that could cost us money in compensation. In fact, Transurban, I think, said it was revenue neutral whether they built it or not. Some big businesses have been advertising in favour of the West Gate Tunnel project. Have you?

THORBURN:  No, I don’t know enough about that specific one, Neil, but can I just make the point that I was sort of trying to make before that something like the West Gate Tunnel – but don’t take that specifically – we need something like this sort of infrastructure. Everyone knows that, and then we caught in the detail debate and the partisan politics of it. We’ve got to lift above that and come up with a plan for the people that’s going to make it easier for them to live and work in this great city.

MITCHELL: You confirmed this week that you’re cutting 1000 people every six months over three years. At the same time, I had the Treasurer in talking about jobs and growth and the economy, which sort of a conflicting message. Why? Why are you cutting those jobs?

THORBURN: So, Neil, our business is going through dramatic change and our customers are demanding simpler and faster services as part of their lives, whether they’re businesses or individuals, and we have to respond to that. Technology is now disrupting and transforming and presenting so many opportunities for us, and what we want to do is build a long-term plan for our business, and we’re being open about that. We’re investing a lot more money in the next three years – actually, 50 per cent more than what we normally invest. So not just $1 billion a year; $1.5 billion every year.

But what we want to build is a workforce where there is engagement and trust, and we’ve said: look, our business is changing. Our industry is changing, and as we invest in making things simpler and faster for our customers, there’ll be certain jobs that won’t be as needed in the future. What we also are saying is, though, there’s 2000 jobs that we’re hiring in the next three years: data scientists, computer programmers, IT architects. That’s creating a whole new demand for new jobs, but it is just the changing nature of the workforce, and us wanting to be open about that and help people as they go through it.

MITCHELL: I read a report – I can’t quote it – but I read a report somewhere about people wanting more branches. I certainly have that experience myself when I’m looking for a branch of any bank. Will we get more branches or are they on the way out?

THORBURN:       Well, I think it depends, because there are some branches where they’re being used less and less, because the population has moved away from it or a shopping centre has relocated, people are using tap and go more. So branch transactions are falling. However, if you go to the growth corridors in Melbourne and Sydney where there’s more and more population – going back to your first point – we’ll be opening branches there.

MITCHELL: Net gain or not? Will your number of branches up or down?

THORBURN: I think net it’s going down, because people are using them less as they can have technology and it’s more convenient for them. So net it will go down, but I think we will be opening branches as well.

MITCHELL: Is there a policy to reduce a certain number of branches?

THORBURN: No, there isn’t, absolute not. There is a policy to adapt and invest where our customers need us to be and the end result all that will be that some branches get used more and some will get used less and we just deal with that as a business should.

MITCHELL: Hello, Faye, go ahead please.

CALLER FAYE:  Hello, Andrew and Neil. I’m wondering why in simple terms interest rates are so low for the depositor and why have they remained so low for such a long period of time?

THORBURN: Yep, hi Faye, Andrew here, and I think that’s a very pertinent question because a lot of our customers do rely on the interest off deposits for their income, especially older clients. But the reason why it’s so low is in Australia there has been a very low official cash rate set by the Reserve Bank of Australia and we’ve had very low inflation. So we’re just at that point where interest rates are at a very low point of the cycle. You know if you go back 20 years they were a lot higher and in fact go back 10 years they were quite a bit higher. So because of the cash rate set by the Reserve Bank and low inflation it just means that deposit rates are a lot lower. Of course mortgage customers are getting the benefit of that because they’ve got the lowest rates in 50 years. But it is an issue for clients who rely on that deposit income. But I think because there’s low inflation that’s helping the situation.

MITCHELL: You mention the cycle, would it be fair to assume the cycle’s turning around, we are on the way up?

THORBURN: Well, we’ve had low rates for quite a long period of time and we are forecasting one or two rate rises by the Reserve Bank over the course of the next 12 months or so. So yes, we think the low point of the cycle’s been reached and it’s going to edge back up. It’s not going to shoot back up.

MITCHELL: Are you concerned that could see people who are over committed in mortgages losing their houses?

THORBURN: Well when we assess a client who wants to borrow money, Neil, we do take that very seriously. That’s obviously a contract and a commitment, they’re taking on debt. But what we do is if it’s a mortgage customer, a home loan customer, we require them to be able to pay a minimum of 7.25 per cent. So whatever the rate they’re paying – and most will pay two per cent less than that at the moment – we require them to be able to pay 7.25 and they must be able to pay back principal as well as the interest in their repayments. So they may end up being lower rate and interest only for a period but we assess that they can pay it if needed.

MITCHELL: Will you lend 100 per cent of the value?


MITCHELL: What’s the maximum?

THORBURN: Well there’s now restrictions around this we prefer people to have a savings record. So up to 80 per cent loan-to-value. But that’s very difficult for young people who are trying to save. So we will go up to 90 per cent but we are more restrictive because we don’t want people to over burden themselves.

MITCHELL: Andrew Thorburn, chief executive of the National Bank challenge in a moment.


MITCHELL: Andrew Thorburn, chief executive of the National Bank. A couple of questions off air. Are there fewer National Bank ATMs around than others?

THORBURN: No, I think there is probably- if we include our rediATM network which is alliance we’ve got, that will actually make us very very competitive. So no, that we will have a very good reach for ATMs.

MITCHELL: And another one; why do we still sign the back of the credit card?

THORBURN: That’s going to go out over time as people are using digital ID but that’s just for identification if needed at the time. Sometimes you know, they turn it around just check that it’s the same signature.


THORBURN: But that will be phased out.

MITCHELL: Just about every politician I’ve had this week I’ve asked who they’re sleeping with – and I don’t have to ask you because you don’t have a policy, or do you have any policy in the bank on relationships between senior staff and junior staff?

THORBURN: Yeah. I mean this is a delicate one isn’t it? We don’t have a policy that bans it but we have a policy a code of conduct that’s very clear that we take seriously and we absolutely inspect in particular senior leaders to do that. And our policy is if there is a relationship that gets formed at work that it must be made transparent, it must be disclosed, particularly if there’s a power imbalance and it must be disclosed to their people leader or to somebody in the human resources department. So that’s the way we require it.

MITCHELL: How many staff have you got?

THORBURN: Thirty-three thousand.

MITCHELL: So there’d be the odd relationship there one would assume?

THORBURN:  Yes. And I think that’s a tough one because there’s people in the bank who met in the bank, legitimate long term relationships, so we have to be careful about how we handle it but that’s how we handle it.

MITCHELL: Now next week we have the Wheel going round to raise money for the Royal Children’s Hospital Good Friday Appeal. A number of companies have agreed to get in. We’ll set up specific donation spots in their name and people ring and donate money in the name of the organisation which is when they’re allowed off. I was going to lock you on board but unfortunately you’re elsewhere.

THORBURN: Well I am, Neil, but what a great initiative and well done to you because the Royal Children’s Hospital is so important isn’t it? We as a bank have been involved with this for 60 years and we have 200 volunteers going to help with the money count this year. But on the Wheel, so I have a long standing commitment in Sydney next Friday I need to be there all day, I would have gone on the Wheel. But I will commit to a minimum of $10,000 anyway and there is another Andrew on our executive team, Andrew Hagger, so I’ve asked him to go on. So he’s going on for me and he’s going to guarantee to raise another 10, so we won’t let him off until he gets the second 10, so we will commit to a minimum of 20 and we hope to do better.

MITCHELL: Oh that’s magnificent. What’s his position?

THORBURN: He is in charge of our whole retail branch network and wealth business throughout Australia.

MITCHELL: So he will want to get off at some stage?

THORBURN: Yeah, he will want to get off. He’ll be able to actually see quite a few of his branches as he looks out around Melbourne from the top.

MITCHELL: That is very generous. So there’s a minimum of 20 grand there which is really magnificent and it’s a great cause as you say.

THORBURN: Absolutely.

MITCHELL: Thank you so much for coming in.

THORBURN: Great, thanks Neil.

MITCHELL: Andrew Thorburn, chief executive, National Australia Bank.



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