E & O E – PROOF ONLY
NEIL MITCHELL: On the line is Andrew Thorburn, good morning.
ANDREW THORBURN: Good morning Neil.
MITCHELL: OK how will I notice it if I’m a customer? What will change for me?
THORBURN: Well what’s going to change Neil is – as we make the significant investment we’re making to simplify the bank – it will be so much easier for our customers to do business with the bank.
THORBURN: It just means they will be able to do a lot more online through their mobile devices and even when they go into branches and business centres, and we’re still going to have many of those, it will be so much easier to do what they want to do. Because the feedback I get from our people and from customers is that there is just too many forms, too many manual processes, we ask for information we already got. And that’s because behind it all there is very complex systems that are old that we need to replace.
MITCHELL: How many branches do you have now, where I can actually walk in and talk to a person?
THORBURN: Well we have about 700.
MITCHELL: Is that staying?
THORBURN: What’s happening is that more and more customers are using their mobile device and online banking and some branches are being used less and less and less. And as that happens, like any business, we need to adjust. So we will close some branches; we don’t have a target. It’s more that as that trend continues we will review those. But also as we said yesterday we are opening 10 new branches. There are two big growth corridors in Australia at the moment; one is in the western part of Melbourne and one is in the western part of Sydney. And we said yesterday, for a start we’re going to open 10 branches there, because you know places like Sunbury and Tarneit and Hoppers Crossing – outer parts of Melbourne are growing so fast and we need to put more people there because that’s where customers are going.
MITCHELL: I understand that you don’t have a target, but do you have an estimate on the net loss of branches?
THORBURN: In the last year I think the net number was about 18 that we closed.
MITCHELL: Do you expect that will continue at that rate?
THORBURN: Well I think it probably will but it’s being driven, Neil, by customers using branches less and less. That’s what we’re reacting to as a business. So we’re not forcing that, we don’t have a target to say this is the number we want to get to. But as customers use those branches less, they become less viable. The challenging thing is, most of them are not in metro areas they are in the regional parts of Australia, which is a tough one because those towns are shrinking and less jobs are there and we’re just part of that game.
MITCHELL: So you want to halve the number of over the counter transactions by requiring people to go to online banking, right?
THORBURN: The trend is happening that way; people are using ATMs, they are using their mobile device, we’re using video conferencing, over the counter transactions are declining at quite a rapid rate. And people aren’t depositing cheques like that anymore and doing cash withdrawals. And as we enable people to do more things over the phone and on their phone, over the counter branch transactions are falling every single year.
MITCHELL: Are you one of the people that believe cash money is going? That we just won’t have real cash in our pocket?
THORBURN: I think that’s going to happen eventually but it will take many years to get there. Australia is one of the countries where the take-up of mobile banking is being taken up by people at such a rapid rate, and with contactless banking with their cards – it’s just cash is becoming less and less used. And I think eventually, we’ll get to the point where we probably won’t have it at all.
MITCHELL: I can’t say this is applied specifically to you, but we do get a lot of complaints about call centres. If there’s fewer branches and less face to face transaction, will you at least boost the call centres so we don’t wait as long?
THORBURN: Well, the first thing about call centres is ours are all in Australia, so that is the first thing for people to note. But as we simplify all our banking and including – when you phone a call centre there’s various processes you need to through that are a bit frustrating for staff and customers. We’ll simplify a lot of that, which will probably mean over time we’ll have less people in those contact centres but the service experience is going to be dramatically better for our customers.
MITCHELL: Do you reckon in 10 to 20 years we’ll have branches?
THORBURN: I think we will. I’ve been in banking for over 30 years and I started in a branch that had 32 people in it. And I think today that branch probably would have five, but it would be doing more business. But when the internet came in, and I say to people, “look, I started in the bank pre-internet” and younger people say, “what is that” – they don’t know anything other than that. But those times people said that the branch is going to be dead. And it’s not. We still have 700 branches today. And yes, that will fall a bit. But I think people want face-to-face contact Neil. That’s what humans want. And particularly for big decisions they make about how do they save for retirement, how do I start a business and how do I buy my first home, face-to-face contact will be important. So, yes, I think we’ll always have branches.
MITCHELL: I notice for this three to five year plan your shares dropped yesterday. Why?
THORBURN: Yeah, I think that’s because Australia and the market has become so short-term. And what we’re laying out here is a long-term plan; three to five years. We’re investing $1.5 billion more in the next three years to create a better and simpler bank. And I think everyone likes to know: are profits going up next year? And what’s going to happen in the next year?
We’re taking a longer term view and the market will just take a wee bit of time to digest that. I think they’ll come around because it’s a good plan and we’ll deliver it. But it’s just the short-term reaction.
MITCHELL: Pretty healthy profit even though it’s not a huge increase; 2.5 per cent-odd; it’s $6.6 billion isn’t it. It’s pretty good.
THORBURN: It’s a good profit, and I think it’s important the bank makes a profit because it keeps the bank strong and we can keep lending and developing new systems and products. But $5.3 billion of that, Neil, over the year goes straight back to Australians because they’re our shareholders.
MITCHELL: I’ve got an email here on the issue: please ask Mr Thorburn, part of the new outlook includes reducing charges if customers are doing the work that used to be done by bank staff. In other words you go online and do it yourself, your charges reduce, your fees reduce.
THORBURN: Yes and I think over time there’s been less and less fees that we’ve charged and I think there’ll be more competitive pressure in that space. Over the last few years – I mean we led with dishonour fees and we have no account keeping fees.
We’re the only bank in Australia that does not have an account keeping fee, and we’ve had that since 2010. So, I think there’s going to be more and more pressure that fees are going to be squeezed as technology advances and competition continues to put pressure on it.
MITCHELL: I’ll let you go in a moment… last time we spoke you said you thought interest rates were on the way up, do you feel the same way?
THORBURN: I think over the next year most of the economists in the country are forecasting a slight rise in the cash rate, but I still think rates are going to remain low. Because the economy – whilst it is in reasonable shape, it’s not in strong enough shape that I think interest rates can go up dramatically. So I think there’ll be a slow rise over time.
MITCHELL: And there’s a Treasury report suggesting today – it’s in The Australian newspaper – that a decade of political instability has led to a slump in investment. And we’ve certainly had that instability. Do you agree that it’s brought an investment slump?
THORBURN: I do think that what businesses want is some certainty and stability and a lot of businesses in Australia are in reasonable shape – they’ve paid back debt and they’ve got capacity. But they’re wanting to see some stability in the political and economic environment. I don’t think Australia is much different to – you look in the US, you look in Britain, you look in France, there’s a lot of change and instability in the world. And I still think, as I said yesterday, that Australia is the best place in the world to run a business and to live. And I think that’s the case today and that’s going to be the case in the future.
MITCHELL: Do you think the citizenship issue is unsettling?
THORBURN: I think it is, yes. And I think it’s a real pity because it’s become a distraction from what we should be talking about which is how to grow our economy long-term and invest in infrastructure and western Sydney and western Melbourne. There’s some really good stories around that we should be talking about and I think unfortunately this is a distraction and the sooner it can get resolved, I think, the better for everyone.
MITCHELL: Maybe we need an audit, how would that be?
THORBURN: Well, I’m used to audits in the bank, so I don’t know how they’re going to resolve it but that will be up to our leaders in government to work through that.
MITCHELL: Thank you for your time.
THORBURN: Thanks Neil.
Find out how NAB is backing communities.