NAB chair Phil Chronican’s mea culpa over internal fraud that cost bank $20m

NAB wants to rule a line under the ‘sad chapter’ that saw it swindled for $20m, as it eyes the potential for higher dividends.

NAB’s chairman Phil Chronican fielded a spate of questions about the bank being defrauded to the tune of $20m. Picture: Nikki Short

National Australia Bank wants to rule a line under the “sad chapter” that saw the lender swindled for $20m, as it moved to soothe investor angst by highlighting earnings momentum and flagging plans to sustain or grow dividends from current levels.

NAB’s chairman Phil Chronican issued a mea culpa on behalf of the bank for not detecting the fraud earlier given it involved the office of the chief executive and high levels of delegated authority.

“It was a very sad chapter in the history of this company and it is inexplicable how a single person could have authority of that nature,” he said in a response to heated shareholder questions at the bank’s annual general meeting on Friday.

“I can’t go back and re-do the past other than to say to you that when we became aware of it, we significantly overhauled the controls … (the fraud) has been “deeply embarrassing to this company and we have done our best to ensure it could never happen again.”

Last month, Helen Mary Rosamond was found guilty of sending falsified and inflated invoices from Human Group to the bank, and providing $5.4m in gifts to NAB staffer Rosemary Rogers to ensure the invoices were paid.

Ms Rogers, the chief of staff to former NAB chief executives Cameron Clyne and Andrew Thorburn, was convicted and sentenced in January last year to a minimum four years and nine months in prison. Ms Rosamond is awaiting sentencing.

NAB is seeking to draw on insurance to cover the fraud losses. The issue was brought to the attention of the bank after several years by a whistleblower, raising concerns about NAB’s risk management processes.

Mr Chronican also spoke at the AGM about the broader operating environment noting 2023 would be “a little rocky” as the Australian economy slowed, but he expressed optimism for the medium term.

“Economies globally are facing new trials and uncertainty remains,” he said.

Asked about how investors should consider the outlook for dividends, Mr Chronican highlighted the bank wanted to reduce its share count and continue to grow earnings which would see dividends sustained or even grow.

“The approach of the bank … is to stop that continual dilution of our shareholders interests and actually have the share count falling rather than growing, and therefore we should be able to sustain dividends as long as the earnings are sustained,” he said.

“As earnings grow and if we are successful in our strategy of containing the share count then we should see dividends grow through time and it is certainly my aspiration if possible to get back to a pre 2018 levels of dividend.”

NAB chief executive Ross McEwan said Australia was well placed to navigate slowing economic conditions, even as businesses and consumers digested eight straight monthly interest rate hikes.

“Resilient business conditions and a return to higher levels of migration mean Australia is well positioned to deal with headwinds coming from rising interest rates and high inflation,” he said.

“New Zealand looks like its business conditions will face more headwinds with interest rate rises slowing the economy down considerably.”

NAB expects 2023 will reflect markedly slower economic growth than this year.

Mr McEwan noted many NAB customers would face more difficult conditions not seen for a number of years.

“Higher inflation, rising interest rates and slower growth are starting to impact both businesses and consumers. Thankfully, the vast majority of our customers are well positioned to manage,” he said. NAB is drawing on financial counsellors and other resources to assist those that enter hardship on their loans.

Separately, the Finance Sector Union used the AGM to raise issues around NAB staff being overworked.

Mr McEwan said the bank had “more work to do” on its enterprise agreement and engaging with staff on working hours, after its offer was knocked back in a vote put directly to employees.

Wilson Asset Management chairman Geoff Wilson, who is campaigning against changes to the treatment of franking credits in two measures being proposed by the federal government, asked Mr Chronican how the reforms would affect the bank.

“We are strong supporters of franking … what it was set up to achieve,” Mr Chronican said. “Measures that threaten that would obviously concern us … The advice that we’ve received is that the announcement of what was intended would not threaten our normal course of business of passing franking credits on dividends through to our shareholders.”

But Mr Chronican noted NAB was keeping close watch on the legislation and was still concerned about potential “unintended consequences”.

Amid tense relations with climate activists at the AGM, Mr Chronican outlined the bank’s views on Australia’s transition to a net zero economy.

“Australia is at a critical juncture in its transition to a low-carbon economy,” he said.

“If we get it right, the opportunities are immense in protecting our environment and growing our economy.”

“We are playing an important role in progressively redirecting funding from emissions intensive sectors toward low and zero emissions activity. There is no question that this needs to happen.

“By 2050, Australia’s economy will look very different.”

But NAB, like its peers, is under fire from climate activists and some investor groups over its lending to high-emitting companies including Whitehaven Coal.

“With a litany of recent loans to facilitate coal, oil and gas expansion projects, it’s little wonder NAB is the focus of a nationwide community campaign and sustained shareholder pressure over its inadequate approach to climate change,” said Will van de Pol, Market Forces’ asset management campaigner.

“NAB proudly claims it hasn’t financed new thermal coal mining projects since 2015, yet the bank still funds Whitehaven Coal, which plans to develop three new or expanded mines.

A resolution jointly put by Market Forces to change NAB’s constitution failed to get enough investor support on Friday, receiving just 4.5 per cent of votes in favour. NAB’s remuneration report received votes in favour of 97.2 per cent.