NAB CEO Ross McEwan today spoke at the AFR Banking and Wealth Summit. Please find below his opening remarks.
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Having lived overseas for the best part of the last decade, I could not be more grateful to have spent 2020 here in Australia.
I say that, understanding how incredibly difficult it has been for those who have lost loved ones, suffered ill-health and for any Australians who have lost income during this time.
Yet Australia and New Zealand are the only two countries in the world where I would want to be living. This is because:
- Both countries are navigating the public health crisis extraordinarily well.
- And, while we are in a recession now, every day I become more confident in our ability to rebound quickly and strongly from COVID-19.
I’ve never seen a Government move so swiftly and comprehensively to support the economy like we have seen here in Australia.
It’s right that the outlook remains uncertain – what we’ve seen in Adelaide this week just demonstrates how quickly things can change.
But as our ability to clamp down on outbreaks improves, and the prospect of multiple vaccines becoming available becomes more certain, we can be optimistic we are on the road to recovery.
Today, I want to discuss the responsibilities that I see for this industry in supporting and accelerating that national recovery effort.
And how, in building a better NAB, this bank will contribute to building a stronger Australia.
Running a bank in the UK after the Global Financial Crisis was very helpful preparation for this year’s challenges.
Ultimately, the experiences at RBS taught me that banks have three very important jobs to do, particularly so in a crisis.
They are:
- Firstly, lend to support investment, to help businesses grow and to create jobs.
- Secondly, keep our depositors’ money safe.
- And thirdly, help impacted borrowers get back on their feet, and in the best possible position.
Banks must look after their balance sheets as capital helps them absorb shocks.
That’s why at the start of this crisis, we acted to lift NAB’s capital position. We never wanted our bank’s stability to be in question.
We can never anticipate or underestimate how fast and how drastically circumstances can change, but we certainly won’t look back and say we didn’t act fast enough this time.
It is usually the unexpected that causes our customers to experience financial difficulty.
In almost all cases, it is not their fault. And the vast majority just need a bit of time.
In normal economic conditions, more than 9 in 10 customers who ask us for help are back up to date within a month or two.
The severity of COVID-related impacts is completely unprecedented in our lifetime, but the principle is the same.
Most customers just need a little bit more time and that’s why deferrals have been so important to give customers the chance to take stock, adjust and get back in business when restrictions allowed.
We went into this period with the theory that a good business pre-COVID will almost certainly be a good business post-COVID.
The resilience we are seeing in the economy is proving this to be true.
Of the 130,000 customers we have assisted, with $60 billion in deferred loans, more than 90% are getting back on their feet or have told us they will not need the deferral in the future.
This is a tremendous position to be in.
There are still many customers though, who feel like they are not through the worst of it yet.
For some of these we know and acknowledge the circumstances have changed their lives and their businesses permanently. There are businesses that just won’t make it back.
When this is the case, the best thing we can do for a customer is work with them to protect their equity so that they can get on and rebuild.
In the past banks have not always done this well, focussing instead on recovering their losses without taking the time to work with customers to understand their options.
With this in mind, my expectation is that NAB will:
- Firstly, treat every single customer fairly.
- Secondly, take the time to consider their unique circumstances and show understanding that loan repayments sit in a pile of other bills to be paid as well.
- Thirdly, be transparent with them about our processes and their options; and that foreclosure is always a very last resort.
- And finally, get them to the other side, in the best possible position, with access to critical support in mental health, social services, financial counselling and legal assistance.
How we treat our customers now, will determine how people see us for decades to come.
We must earn and keep the trust of our customers, because trust is the cornerstone of banking.
Since starting at NAB I have talked to Don Argus a former NAB CEO a number of times.
I also read one of his Annual Reports from 25 years ago, when NAB was Australia’s largest bank.
Back then the corporate values of the organisation were very clear. They were:
- Service to our customers
- Quality in everything we do
- Professionalism and ethics in all our actions
- Competitiveness and a will to win
- Growth and development of our people
- Continuous productivity improvements
And in doing so the out-workings will be
- Growing profit for our shareholders.
In the past 20 years, we’ve lost sight of some of the things that made us a great bank.
Now, we are going back to the very basics of banking, focusing again on the service we deliver to our customers, and improving our systems and processes to make it easier for them to do business with us every day.
We also investing in our NAB colleagues, so they become FINSIA qualified bankers and that means all of them.
Much has changed in our industry over the last 25 years through technology enhancements and digitisation of processes, however the very essence of banking has not.
As Australia and New Zealand’s biggest business bank we are well positioned to get right behind a business-led recovery from COVID.
While challenges clearly remain, every day we are seeing green shoots emerge.
We now have two vaccines showing strong early results that are likely to be introduced in the new year, which will be the essentials to re-opening up the global economy.
Business confidence, while fragile, is back to its highest levels since October 2019.
This has been led by large gains in Victoria. As restrictions ease we have seen a substantial lift in spending as Melburnians get back to shopping and eating out again.
It’s early days, but our data shows that in the second week out of lockdown in Victoria, spending on consumption was up 5.4% on the same week in 2019.
This quarter, we’re already expecting a strong rebound in consumption. Retail sales are up 5.7% in the quarter, which would add more than 1.0 percentage point to GDP.
The housing market has also held up better than first anticipated.
We’re now expecting the Australian economy to get back to pre-COVID levels by late 2021, much earlier than we originally thought.
Across the Tasman in New Zealand, the recovery has been stronger than expected, with a surging housing market driving stronger asset prices.
There are still a number of big issues to manage, but overall the current picture better reflects the “best case” scenario we presented at our recent financial results.
That’s why I am confident we will emerge from this pandemic in a strong position.
The fundamentals that make Australia and New Zealand great places to live and work are very sound.
Many businesses and sectors, such as agriculture, are not only proving resilient, but they are finding opportunities throughout the challenges.
We have seen good old-fashioned ingenuity, with customers adjusting their business-models to find new and better ways to grow.
This spirit of entrepreneurialism will help drive Australia’s economy. It is business that will invest, it will create new jobs and it will create new opportunities.
NAB will be there, open for business, to help make it happen.
NAB has continued to lend $2.4 billion per month since April this year, at historic low interest rates.
We continue to work with the Government on their SME Loan Guarantee Scheme and the Australian Business Growth Fund.
We are also continuing to invest in our bank so we can adapt and grow with our customers.
We will do it safely. But with a mindset of making the most of the opportunity that we have in front of us.
By helping our customers find new markets, buy new equipment and hire new people, we’ll get the economy recovering even faster.
At the same time, we will:
- Lend to support investment, to help businesses grow and create jobs.
- We’ll keep depositors’ money safe.
- And we’ll help impacted borrowers get back on their feet, in the best possible position.
This is the role that NAB will play in helping Australia to rebound quickly from COVID-19.
We will serve customers well. And we will help our communities prosper, once again.
