NAB chief slams ‘simplistic’ Bill Shorten on rates

NAB chief Andrew Thorburn has attacked Labor’s ‘inflammatory and simplistic’ response on rates.

NAB CEO Andrew Thorburn says banks must explain their decisions.

NAB (NAB) chief executive Andrew Thorburn has condemned the Labor Party’s “inflammatory and simplistic” response to last week’s controversial interest-rate movements, as the banking industry prepares to dramatically recast the way it communicates key pricing decisions.

Amid mounting concern across the business community about the febrile political environment, Mr Thorburn said Opposition Leader Bill Shorten’s censure of the banks for “pocketing” last week’s cut in the cash rate had the potential to unsettle investors.

“It’s a good example of the inflammatory and simplistic language that’s not helping a calm and rational debate,” the NAB chief, who is also chair of the Australian Bankers’ Association, told The Weekend Australian.

“I said to Bill Shorten when I saw him this week that we rely on the confidence of depositors and overseas investors to provide us with the capital that we lend to businesses and mortgage holders for a cycle of growth.

“We don’t want overseas investors to be asking: ‘What the hell is going on here?’. The bank makes a profit margin in a well-regulated, competitive marketplace, but it doesn’t really ‘pocket’ anything.”

The major banks have endured a torrid two weeks in the public and political spotlight after they cut their variable mortgage rates by 10-14 basis points in response to the Reserve Bank’s 25 basis-point policy easing.

They justified the lower pass-through by saying they had to ­balance the interests of borrowers with those of investors and ­depositors.

Some term deposit rates were lifted, while dividends remain under pressure because of tighter profit margins, rising loan impairments and weak credit growth.

Late last week, Malcolm Turnbull sought to neutralise Labor’s popular call for a bank royal commission by forcing the bank chiefs to appear before a powerful parliamentary committee at least once a year.

Mr Thorburn, responding to calls in The Australian this week for improved disclosure of the main variables in bank pricing decisions, revealed that NAB was prioritising a comprehensive over­haul of the way it communicates with stakeholders.

The other major banks are working on similar initiatives.

The precedent for NAB is the post-financial crisis period when it prepared slide packs to explain unpopular out-of-cycle rate hikes, linking them to spikes in the bank’s average cost of funds.

This time, Mr Thorburn said the task would be more delicate and challenging.

NAB, though, had no alternative but to “answer the questions that our customers are asking us every day”, and it would do so by making greater use of its own website nab.com.au and social networks such as Facebook and Twitter.

“CEOs need to be visible and talk openly and in a regular way,” the NAB chief said.

“We’ll use video more, like a mini-TED Talk.”

On the NAB website, investors, borrowers and depositors will also see a real-time presentation of the way in which NAB is funding its loan book.

“So my goal is to build a credible, strong bank that answers the questions that customers have,” Mr Thorburn said.

“I have no interest or incentive to ignore those questions. It’s not good for us.”

The NAB chief, who releases the bank’s third-quarter trading update on Monday, said all lenders were grappling with a challenge to the industry’s reputation.

CEOs were “committed to working through this”.

While other bank bosses declined to comment on the record, the spectre of a royal commission is set to hang over the industry for the life of the parliament. “We’re a symbol of big business,” one banker lamented.

“We can review the way we make announcements and what’s in them, but unless we solve the political relations problem — because this is more than a PR problem — it will be a waste of time.

“It’s always two steps back. It’s difficult to see what the exact solution can be.”

Another senior banker said the current environment was as difficult as the 1990s, when the industry’s concerns about its image fatefully led it into the cash-for-comment scandal on commercial radio.

He said the weak global and domestic economy, combined with a hostile regulatory environment, the potential for a war on deposits and rising bad debts, meant that tough commercial decisions had to be made.

“But you can’t ever say: ‘Phew, that was a tough week or a tough month,’ ” he said.

“Nothing seems to happen in isolation. There’s a real relentlessness to it.”