NAB chief Andrew Thorburn works some margin magic

As if by magic, the collapse in NAB’s business-lending margin has been transformed into a run-of-the-mill challenge.

As if by magic, the ugly collapse in National Australia Bank’s business-lending margin, which created so much havoc when it made its unwelcome appearance last October, has been transformed into one of any number of run-of-the-mill challenges.

Mission accomplished. Long live NAB!

Six months ago, the nation’s largest business bank suffered a “very frightening” — in the words of one analyst — 19 basis point contraction in its lending margin to 1.92 per cent.

It was hard to imagine worse news, but there was.

NAB had been shedding market share at a rate of knots and desperately needed to get back in the game by meeting the market and repricing its loan book, the problem being that the loan book rolled over every two-three years and the job was only half-done.

It looked like October’s margin implosion would extend well beyond the March half-year.

However, by some mysterious sleight-of-hand, chief executive Andrew Thorburn revealed yesterday that the margin had stabilised.

Stability is all relative, of course, because in the context of a disappearing margin it means a decline of “only” 6 basis points.

For the market, though, it was high-fives all around.

The NAB share price spiked by the same order of magnitude as last October’s ignominious retreat — about 2.3 per cent.

Thorburn revealed that NAB had swung into remedial action well before its margin pain became public.

The first phase of the mission had been to stem the exodus of customers.

This was followed by a greater emphasis on returns, selling more products like superannuation, transaction accounts or foreign exchange to existing customers.

One of the key elements of the fightback has been a so-called pricing discovery tool, which allows the bank to tap into its network of 214 business banking centres to get a better feed on product pricing for similar customers in different regions.

It’s one of those business insights you’d be entitled to think had been baked into a major bank’s systems years ago. But no.

NAB’s business bankers have only been able to deploy it for six-eight months, although it’s already proven its worth by enabling the bank to charge an optimal price for its products instead of just any price.

The bank has also made steady progress on one of Thorburn’s “technology drops” — implementation of the personal banking origination platform (PBOP).

PBOP slashes the time it takes for a customer to get unconditional approval for a credit card, down from 2.8 days to 1.5 days, or for the funds from a personal loan to appear in the customer’s account, down from 5.2 days to 2.6 days.

Customer feedback has been favourable, with PBOP already rolled out in 285 branches in South Australia, Northern Territory and Western Australia. The rollout is presently being extended to Queensland. NSW, Victoria, Tasmania and the ACT will follow this year.

PBOP will improve productivity, which generally means a heavy pruning of the workforce.

There are persistent suggestions that PBOP alone could mean the disappearance of up to 300 jobs, but Thorburn said that figure had not been mentioned to him.

In any event, technology was deployed because it was good for the bank’s customers, not out of some desire to achieve a job reduction figure.

With cost cuts a strong theme in the bank interim results season, NAB was the exception to the rule established at Westpac and ANZ, in particular, where new chief executive Shayne Elliott will trim his workforce by 7-8 per cent.