NAB homes in on mortgage lending after dumping bonus cap

The banking major will raise home lending bankers’ maximum variable rewards to 80 per cent of their base salary from limits agreed in the wake of a banking industry review.

NAB will increase its banker bonus caps to 80 per cent of their pay. Picture: Getty Images

National Australia Bank has told its home lending bankers it will raise their maximum variable rewards to 80 per cent of their base salary from limits agreed in the wake of a banking industry ­review.

The change, set to take effect on October 1, follows moves by Commonwealth Bank and Westpac’s announcement that it would look at bonus limits for home lending bankers.

In an email to its bankers on Thursday, NAB home-ownership executive Andy Kerr said the bank was increasing its bonus caps in a bid to “be the best bank when it comes to customer service and the most customer-obsessed home lender in the market”.

Mr Kerr, who runs NAB’s home lending for its personal and business customers, said the bank was “working on removing barriers” and had “delivered several improvements” for its bankers.

But Mr Kerry said NAB would “have robust compliance and conduct measures in place” to ensure the lender was “putting the interests of our customers first”, in a nod to the problematic behaviour that saw the bonus caps imposed in the wake of the Sedgwick Review.

The Australian Banking Association commissioned former senior public servant Stephen Sedgwick to run a review of remuneration practices for frontline banking staff in 2016.

This led to the ABA proposing limits on bonuses for staff in 2017.

Mr Kerr told the NAB bankers more information would be provided in September, with the bank’s leaders “working through the finer details” after informing the corporate regulator of its intentions in recent days.

The Australian understands NAB told the Australian Securities & Investments Commission of its plans to relax its bonus cap in recent days, in a move that has sparked concern at the corporate regulator.

As revealed in The Australian, CBA gave ASIC almost 12 months notice it was planning to dump its banker bonus limits under “Project Lily”, with the regulator repeatedly raising concerns with the big bank in meetings before the move.

CBA dropped its limits in April in a bid to tackle competition from mortgage brokers and lending rivals.

NAB moved to relax its bonus caps amid concern its best home lending bankers were being poached by rival banks higher bonus caps or lenders from the non-bank sector.

The Melbourne-based lender is the smallest home lender among the big four after ANZ’s acquisition of regional lender Suncorp Bank.

NAB told investors last week its home lending was trailing rivals and system-wide growth, at just 1 per cent over the June ­quarter.

NAB’s net interest margin remains stable.

ASIC chair Joe Longo said he was concerned over NAB’s move, noting the Segwick reforms were aimed at dealing with “the high risk of poor outcomes for customers from remuneration arrangements involving incentive selling”.

Mr Longo, who unveiled ASIC’s latest corporate priorities on Thursday, said the regulator would now obtain data and closely monitor the changes to bonus caps across the banks, “given the heightened risk to customers that they present”.

“Those banks should be on notice, ASIC will not hesitate to act on any misconduct identified,” he said.

Mr Longo told a parliamentary joint committee in April he found CBA’s move to dump its limits “very disturbing, very disappointing”.

ASIC warned in its corporate plan it was enhancing its data collection and would scrutinise complaints lodged with the Australian Financial Complaints Authority.

The regulator is also expected to look at the lending practices of non-banks and private credit ­lenders.

The change, set to take effect on October 1, comes in the wake of moves by Commonwealth Bank and an announcement by Westpac the bank would look at their bonus limits for home lending bankers.

In an email to its bankers on Thursday, NAB homeownership executive Andy Kerr said the bank was increasing its bonus caps in a bid to “be the best bank when it comes to customer service and the most customer obsessed home lender in the market”.

Mr Kerr, who runs NAB’s home lending for its personal and business customers, said the bank was “working on removing barriers” and had “delivered several improvements” for its bankers.

But Mr Kerry said NAB would “have robust compliance and conduct measures in-place” to ensure the lender was “putting the interests of our customers first”, in a nod to the problematic behaviour that saw the bonus caps put in place in the wake of the Sedgwick Review.

The Australian Banking Association commissioned former senior public servant Stephen Sedgwick to run a review of remuneration practices across frontline banking staff in 2016.

This saw the ABA propose limits on bonuses for staff in 2017.

Mr Kerr told the NAB bankers more information would be shared in September, with the bank’s leaders “working through the finer details” after informing the corporate regulator of its intentions in recent days.

The Australian understands NAB told the Australian Securities & Investments Commission of its plans to relax its bonus cap in recent days, in a move which has sparked concern at the corporate regulator.

As revealed in The Australian, CBA gave ASIC almost 12 months notice it was planning to dump its banker bonus limits under “Project Lily”, with the regulator repeatedly raising its concerns with the big bank in meetings before its move.

CBA dropped its limits in April in a move by the bank to fight off competition from mortgage brokers and lending rivals.

NAB made its move to relax its bonus caps amid concern its best home lending bankers were being poached by rival regulated banking rivals with higher bonus caps or lenders from the non-bank sector.

The Melbourne-based lender is the smallest home lender among its rivals CBA, Westpac and even ANZ after its acquisition of regional rival Suncorp Bank.

NAB told investors last week its home lending was trailing rivals and system-wide growth at just 1 per cent over the June quarter.

This came despite NAB’s net interest margin remaining stable.

However, ASIC chair Joe Longo warned he was concerned over NAB’s move, noting the Segwick reforms were aimed at dealing with “the high risk of poor outcomes for customers from remuneration arrangements involving incentive selling”.

Mr Longo, who unveiled ASIC’s latest corporate priorities on Thursday, said the regulator would now obtain data and closely monitor the changes to bonus caps across the banks “given the heightened risk to customers that they present”.

“Those banks should be on notice, ASIC will not hesitate to act on any misconduct identified,” he said.

Mr Longo told a parliamentary joint committee in April he found CBA’s move to dump its limits “very disturbing, very disappointing”.

ASIC warned in its corporate plan it was enhancing its data collection and would scrutinise issues lodged with the Australian Financial Complaints Authority.

The regulator is also expected to look at the conduct of non-banks and private credit lenders over concerns with their lending practices.