Annual Report 2023National Australia Bank Limited ABN 12 004 044 937 National Australia Bank Limited ABN 12 004 044 937This 2023 Annual Report (Report) is lodged with the Australian Securities and Investments Commission and ASX Limited. National Australia Bank Limited (NAB) is publicly listed in Australia. The Report contains information prepared on the basis of the Banking Act 1959 (Cth), Corporations Act 2001 (Cth), 4th edition ASX Corporate Governance Councilʼs Corporate Governance Principles and Recommendations, Accounting Standards and interpretations issued by the Australian Accounting Standards Board and International Financial Reporting Standards and interpretations issued by the International Accounting Standards Board. It also provides information on the Groupʼs activities and performance in 2023, showing how the Group is creating value through its strategy, operating environment, governance and financial and non-financial activities. NAB also produces a Climate Report which can be viewed online at nab.com.au/annualreports. To view the Report online, visit www.nab.com.au/annualreports. Alternatively, to arrange for a copy to be sent to you free of charge, call the shareholder information line on 1300 367 647 from within Australia or +61 3 9415 4299 from outside Australia. Nothing in the Report is, or should be taken as, an offer of securities in NAB for issue or sale, or an invitation to apply for the purchase of such securities. All figures in the Report are in Australian dollars unless otherwise stated. 2023 Reporting Suite
Acknowledgement of Country
NAB acknowledges Australia’s First Nations people as the Traditional Custodians of the land and their continuing
connection to country, sea and water. We pay respect to their Elders past and present.
We make this acknowledgement with the ambition to continue supporting a reconciled Australia through our actions and
voice. This is backed by why we are here: to serve customers well and help our communities prosper.
“Indigenous Australians”, "Aboriginal and Torres Strait Islander" and "First Nations people" (or "First Nations Australians")
are used interchangeably throughout this report. By intent, these terms refer to Aboriginal and/or Torres Strait Islander
peoples of Australia. These terms, however, do not reflect the diversity of Aboriginal and Torres Strait Islander peoples. NAB
acknowledges that many Aboriginal and Torres Strait Islander people prefer to be known by other cultural names.
2023 Annual Report
NAB’s 2023 Annual Report provides information on the Group’s activities and performance
during 2023. It outlines how NAB is creating value through its strategy, operating environment,
governance, financial and non-financial activities.
The Annual Report draws on aspects of the International Integrated Reporting Framework. It is
supported by the additional documents outlined below.
Report Structure
Pages 12 to 55 contain information on the Group’s business, strategy, operating environment
and performance. These pages outline performance relevant to customers, colleagues, climate
change and environment, technology, data and security, and communities. Stakeholder feedback
was considered in the shaping of this section (refer to What matters most on page 24 for
more information).
Pages 61 to 85 contain NAB’s 2023 Corporate Governance Statement, which discloses how the
ASX Corporate Governance Council’s ‘Corporate Governance Principles and Recommendations –
4th edition’ have been complied with.
Pages 102 to 156 contain key components of the Report of the Directors.
Pages 115 to 154 contain the Remuneration Report.
Pages 159 to 255 contain the Financial Report.
Assurance
The Remuneration Report on pages 115 to 154 and Financial Report on pages 159 to 255 have been audited by EY. The assurance
statement for the Financial Report and Remuneration Report is on pages 256 to 261.
EY provides limited assurance over 25 key non-financial sustainability metrics and performance disclosures and a further seven metrics
relating to NAB's Reconciliation Action Plan as outlined in EY's limited assurance statement on pages 56 to 59.
KPMG provides assurance over selected environmental measures disclosed across NAB's reporting suite. KPMG’s assurance statements
are available on NAB's website at nab.com.au/about-us/social-impact/shareholders/performance-and-reporting.
Additional documents
2023 Full Year Results
Investor Presentation
Information designed
for analysts and
institutional investors
which accompanies
the Group's Full Year
Results Presentation.
Management
Discussion
and Analysis
Management
discussion and
analysis of the
Group's results for
the year ended
30 September 2023.
2023 Climate Report
2023 Pillar 3 Report
Describes the Group's
approach to risk
management and
provides details about
risk exposures, capital
adequacy and liquidity.
Provides stakeholders
with information on
the Group's approach
to climate change
and how it manages
associated risks and
opportunities. The
report is guided by
the recommendations
of the Financial
Stability Board's Task
Force on Climate-
related Financial
Disclosures (TCFD).
2023 Sustainability
Data Pack
Provides further detail
on the Group's ESG
performance, in addition
to the material themes
covered in the Annual
Report and the
Climate Report.
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National Australia Bank Limited ABN 12 004 044 937Annual Report 2023National Australia Bank Limited ABN 12 004 044 937Full Year Results 2023Investor Presentation 9 November 2023Ross McEwan Chief Executive OfficerNathan GoonanChief Financial OfficerNational Australia Bank Limited ABN 12 004 044 937Full Year Results 2023Management discussion and analysisNational Australia Bank Limited ABN 12 004 044 937Climate Report 2023National Australia Bank Limited ABN 12 004 044 937Pillar 3 Report as at 30 September 2023Incorporating the requirements of APS 330National Australia Bank Limited ABN 12 004 044 937Sustainability Data Pack 2023
2023 Reporting Suite (cont.)
Additional information
Certain definitions
The Group's financial year ends on 30 September. The financial year ended 30 September 2023 is referred to as 2023 and other
financial years are referred to in a corresponding manner. Reference in this document to the year ended September 2023 are
references to the twelve months ended 30 September 2023. Reference in this document to the environmental reporting year are
references to the twelve months ended 30 June 2023. Other twelve month periods referred to in this document are referred to in
a corresponding manner.
The abbreviations $m and $bn represent millions and thousands of millions (i.e. billions) of Australian dollars respectively.
Key terms used in this report are contained in the Glossary.
Forward looking statements
This report contains statements that are, or may be deemed to be, forward looking statements. These forward looking
statements may be identified by the use of forward looking terminology, including the terms "believe", "estimate", "plan",
"project", "anticipate", "expect", "goal", “target”, "intend", “likely”, "may", "will", “could” or "should" or, in each case, their negative
or other variations or other similar expressions, or by discussions of strategy, plans, objectives, targets, goals, future events
or intentions. Indications of, and guidance on, future earnings and financial position and performance are also forward
looking statements. You are cautioned not to place undue reliance on such forward looking statements. Such forward looking
statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors,
many of which are beyond the control of the Group, which may cause actual results to differ materially from those expressed or
implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements.
There are a number of other important factors that could cause actual results to differ materially from those projected in such
statements, including (without limitation) a significant change in the Group’s financial performance or operating environment; a
material change to law or regulation or changes to regulatory policy or interpretation; and risks and uncertainties associated
with the ongoing impacts of the Russia and Ukraine war, conflict in the Middle East and other geopolitical tensions, the Australian
and global economic environment and capital market conditions. Further detail is contained on page 89 under Disclosure on
Risk factors.
Contents
Our business in 2023
2023 at a glance
Chair's message
CEO's message
Creating value
Our business
Strategy
What we will be known for
Operating environment
Creating value
Sustainability approach
Customers
Colleagues
Climate change and environment
Technology, data and security
Helping our communities prosper
Independent limited assurance statement
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Corporate Governance Statement
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Corporate Governance Framework
Board of Directors
Executive Leadership Team
Key Board activities
Board composition, diversity and performance
Board committees
How We Work
Assurance and control
Compliance with ASX corporate
governance recommendations
Risk management
Risk management overview
Risk factors
Report of the Directors
Operating and financial review
Directors’ information
Other matters
Remuneration Report
Directors' signatures
Auditor's independence declaration
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Financial report
Income statements
Statements of comprehensive income
Balance sheets
Statements of cash flows
Statements of changes in equity
Notes to the financial statements
Directors' declaration
Report on the audit of the financial report
Additional information
Glossary
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Our business in 2023
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2023 Annual Report
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2023ata glanceKey financial performance measuresStatutory net profit$7.41bn7.5% increase from 2022Cash earnings(1)$7.73bn8.8% increase from 2022Dividends declared per share (for the full year)$1.67$0.16 higher than 2022Common Equity Tier 1 capital ratio12.22%71 bp increase from 2022Cash return on equity(1)12.9%120 bp increase from 2022Diluted Cash EPS (cents)(1)238.012.4% increase from 2022(1)Full detail on how cash earnings is defined, a discussion of non-cash earnings items and a full reconciliation of statutory net profit attributable to owners of NAB is set out in Note 2 Segment information of the Financial Report on page 169. Statutory return on equity and statutory earnings per share (EPS) are presented on page 106.(2)Net Promoter® and NPS® are registered trademarks and Net Promoter Score and Net Promoter Systems are trademarks of Bain & Company, Inc., NICE Systems, Inc. and Fred Reichheld.(3)Sourced from DBM Consumer Atlas (part of RFI Global), measured on 6 month rolling average to September 2023. Consumer NPS excludes consumers with Personal income of $260k+ and/or investible assets $1m+. Ranking based on absolute scores, not statistically significant differences.(4)2023 Heartbeat Survey conducted by Glint, score based on July 2023 survey. Includes Australia and New Zealand colleagues, excludes external contractors, consultants and temporary colleagues.(5)Sourced from DBM Consumer Atlas (part of RFI Global), measured on 6 month rolling average to September 2023. Based on all consumers, 18+, in either High Net Worth definition or Mass Affluent definition and on equal (50:50) combined weighting of included segments. Mass Affluent includes consumers with Personal income of $260k+ and investible assets less than $2.5m and/or investible assets $1m<$2.5m, High Net Worth includes consumers with Investible assets of $2.5m+. Ranking based on absolute scores, not statistically significant differences.(6)Peter Lee Associates – Large Corporate and Institutional Relationship Banking Survey Australia 2023. Ranking against all banks included in survey.(7)Sourced from DBM Business Atlas (part of RFI Global), measured on 6 month rolling average to September 2023. Business NPS is based on equal (25:25:25:25) combined weighting of NAB turnover segments: Micro (Up to $100k turnover), Small ($100k - $5m turnover), Medium ($5m - $50m turnover), Large ($50m+). Ranking based on absolute scores, not statistically significant differences.(8)Comprises CBI compliant and Green Bond Principles (GBP) aligned green lending associated with NAB’s Green Bond Framework, including renewables, green CRE (REIT) lending, low carbon transport, water infrastructure, electrical grids and storage and forestry, land conservation and restoration and green securitisation for new 2023 lending drawn amounts ($2.6 billion), sustainability-linked loan lending, based on proportion of KPIs that are environmentally related and new 2023 underwriting and arranging activities ($1.9 billion) as at 30 September 2023. For more information, refer to the Environmental financing section on page 55 and the Environmental financing methodology section on page 74 of NAB’s 2023 Climate Report(9)Affordable and specialist housing includes affordable housing, specialist disability accommodation and sustainable housing. Refer to the Affordable and specialist housing section of this report on page 29 for further details.Other key performance measuresNet Promoter Score (NPS) - Consumer(2)(3)-2#1 among major Australian banksColleague engagement score(4)781 point above top quartile target score of 77NPS - High Net Worth and Mass Affluent(2)(5)-7Equal #2 among major Australian banksRelationship Strength Index - Corporate(6)#2Among major Australian banks5#2NPS - Business(2)(7) among major Australian banksSupporting customers to decarbonise and build resilience$4.5bnNAB's new green lending, green CRE (REIT), securitisation, and underwriting and arranging activities(8)Positive social impact through financing affordable & specialist housing$2.2bnProgress against cumulative target of $6 billion by 2029(9)
Chair's message
Strength and stability
Our consistent execution of the bank’s strategy over multiple
years is continuing to benefit NAB’s customers, employees
and shareholders. We are making steady progress in building
the bank we want and that work continues.
Our executive leadership team is delivering consistently and
demonstrating discipline in how the bank operates. This
includes prioritising the experiences of our customers and
our people. We are seeing the outcomes of this through our
Net Promoter Score(1) and market share while our employee
engagement is growing. The calibre of our senior people has
been demonstrated through internal appointments to senior
executive roles during the year.
This capability has enabled us to grow the bank safely and
support our customers in a complex economic environment.
We are improving the culture within NAB, with a strong focus on
the impact we have in the communities we serve. Culture and
risk management remain front of mind for all of us.
Preparing for the future
The outstanding regulatory issues identified through the
Financial Services Royal Commission have largely been closed.
Matters relating to NAB’s Enforceable Undertaking with
AUSTRAC are progressing to plan.
We are focused on securing NAB’s position for the long term.
The economic environment remains uncertain and there are
new and emerging risks to be managed. While the Australian
economy is slowing, it is still growing.
Lessons learned guide our approach to keeping the bank safe,
protecting customers and innovating to be a leading financial
services provider.
Australia is in a good position and we are cautiously optimistic
for the future while being alert to geopolitical tensions and
the impact that these may have.
Financially secure bank
An increase in underlying earnings this year reflects positive
contributions from all businesses. The Board has determined
dividends for the year of 167 cents per share, returning
$5.2 billion in total to shareholders.
For the third consecutive year we have undertaken a
share buy-back while maintaining healthy capital levels. This
supports our ambition to progressively manage down our
share count and support shareholder returns.
Over the three years to September 2023, total shareholder
return was 85.8 per cent, against an average return of 65.2 per
cent for NAB’s major bank peers.
The Board has determined executive and employee
remuneration outcomes based on the bank’s performance
against the targets set in NAB’s 2023 plan. These are
aligned with shareholder outcomes and include financial
performance, market share growth, customer outcomes
and colleague engagement. These outcomes reflect good
progress of our strategy. The Board is focused on maintaining
responsible levels of executive remuneration.
Board renewal
We were pleased to announce the appointment of Christine
Fellowes, Carolyn Kay and Alison Kitchen to the NAB Board, to
be considered by NAB’s shareholders at our Annual General
Meeting (AGM) in December. Our existing directors Simon
McKeon and Ann Sherry will also stand for re-election with our
full support.
At the same time and after having each served three terms
of three years, David Armstrong and Peeyush Gupta will
retire from the NAB Board at the conclusion of the AGM. On
behalf of all shareholders, I thank them for their significant
contributions in this period.
These changes are in line with NAB’s Board renewal strategy
and desire to bring relevant new skills, experience and
broader diversity to the Board.
We are modernising our technology and our digital, data and
analytics capability.
At the same time, we are ensuring the bank is well
prepared for further shifts in the global operating environment
and acting to strengthen communities and build value
for shareholders.
Where appropriate, we will engage in and take action to
support broader community issues where there is benefit for
our customers, community and the bank. These decisions
are made after careful consideration of a range of views.
During the year we supported the ‘Yes’ campaign on the
referendum for an indigenous Voice. This was done because
of our strong interest in addressing First Nations disadvantage
in the communities in which we operate. We continue to work
towards reconciliation through our own Reconciliation Action
Plan and growing indigenous businesses.
Global decarbonisation is gathering pace and there is a
growing urgency to transition economies faster.
What we achieve from now to 2030 is critically important
and Australia needs to act quickly to set up our economy to
capitalise on the opportunity before us.
This year NAB has set 2030 decarbonisation targets for
another three emissions-intensive priority sectors: aluminium,
iron and steel, and aviation. This builds on targets set last
year for power generation, oil and gas, thermal coal mining
and cement production. We plan to set targets for another
three sectors by May next year, in line with our requirements
as a member of the UN-convened Net Zero Banking Alliance
and our ambition to align our lending portfolio to net zero
emissions by 2050.
On behalf of the Board, I would like to thank you for
your ongoing support as shareholders. I would also like to
recognise NAB’s team of more than 38,000 for the work they do
serving customers well and helping our communities prosper.
(1) Net Promoter® and NPS® are registered trademarks and Net Promoter Score and Net Promoter Systems are trademarks of Bain & Company, Inc., NICE Systems, Inc., and
Fred Reichheld.
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National Australia Bank
Chair's message (cont.)
We are fortunate to have Ross McEwan as CEO. Ross has never
wavered from his intent to have NAB operating as a good bank
that does the basics well for customers. NAB has come a
long way in recent years. There’s still more to do, and we are
pleased with the progress being made.
Philip Chronican,
Chair
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2023 Annual Report
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CEO's message
Building momentum and capability
NAB’s strategy is in its fourth year and our results
demonstrate we are making progress to be a simpler, better
performing bank.
Pleasingly we have delivered a strong financial performance
this year with positive contributions across each of our
divisions, in a more challenging environment.
We are seeing the benefits of the deliberate choices we
are making about where we invest. Our leading Business and
Private Banking division has continued its record of strong
growth. This is a great business built on strong relationships
and we are determined to make it even better.
The second half saw our financial results soften as the
impact of higher rates and inflation increasingly weighed on
households and the economy. We expect 2024 will remain
challenging, reflecting continued slower economic growth and
elevated inflation. Inflation has added cost pressures which
we were able to offset partially through productivity savings
in line with our target of $400 million. We will be disciplined
on costs through 2024, while continuing to invest in the
experience of customers and colleagues.
This year we delivered a simpler, more modern Enterprise
Agreement that puts our colleagues in a better place
than before.
Our focus on the skills, training and development of our
bankers is supporting a more capable and engaged workforce
that can meet more of our customers’ needs.
Well positioned to rebound
For many in Australia and New Zealand, 2023 has been
challenging. The economies of both countries have slowed,
and needed to, to counter inflation at levels not seen for
three decades.
In Australia, the impact of 13 rate rises is being felt. The higher
cost of living is the greatest driver of stress for consumers.
This has changed how people are managing their money with
Australians more engaged with their finances than previously.
Most are maintaining a budget and cutting back on spending
to focus on the things that matter to them.
I expect Australia will avoid recession, but it will continue to
feel harder for a while yet.
Despite headwinds, business conditions remain above
average and businesses I talk to are ambitious for growth.
With strong migration levels, low unemployment and demand
for our natural resources, Australia is well placed to rebound in
the second half of next year.
In New Zealand, there are also reasons for optimism. High
migration and low unemployment should support a return to
growth during the next 12 months.
Supporting and protecting customers
Throughout the year NAB has been checking in with
customers. While a small number have required support, the
message we’ve mostly heard has been ‘thank you, but we’re
doing ok’.
We increased the size of our NAB Assist team by 120 people to
support those in greatest need. To those who need support
our message is clear, please call us early.
We are working hard to fight the scams epidemic. We have
a range of initiatives completed or underway to protect our
customers from the multinational criminal groups that are
relentlessly targeting Australians. Our improvements include
being the first Australian bank to remove links from unsolicited
8
National Australia Bank
text messages and the introduction of payment prompts to
slow down digital payments that seem unusual.
As new challenges emerge we will find more ways to better
support and protect our customers.
Investing in the future and community
We are investing for the long-term benefit of customers,
colleagues and the community.
Artificial intelligence offers the potential to support
meaningful interactions with our customers and benefit both
customers and colleagues. Our teams are working to get the
right safeguards in place.
Housing affordability and supply has become one of the
nation’s greatest challenges and urgent action is required to
solve this problem. We work with NAB customer and partner,
The Salvation Army, to provide relief to Australians in housing
crisis or affected by homelessness.
We celebrated this year a 20-year partnership with Good
Shepherd Australia New Zealand, having supported close to
one million people experiencing vulnerability with more than
$480 million low and no interest loans. This community
partnership is now entering a new chapter with a focus on
affordable housing.
We also announced a target to lend at least a further
$6 billion by 2029 to help more Australians access specialist
and affordable housing. We will assess new opportunities to
work with government and industry on this.
In the communities in which we operate, natural disasters are
all too frequent. NAB Foundation helps communities withstand
and recover from natural disasters. The Foundation has
partnered with Disaster Relief Australia to recruit and manage
3,000 community volunteers be on stand-by when needed.
Taking action on climate change is everyone’s job as Australia
reaches a critical point in the transition to a net zero
economy. We recognise our role to support our customers to
get there.
We have an ambition to lend $1 billion over three years to
First Nations businesses and have a specialist team leading
this work. We recognise a strong First Nations business
sector creates opportunities for communities to succeed and
contributes to a strong Australian economy.
CEO's message (cont.)
Looking ahead
The banks that perform best are the ones that get the basics
right consistently and we are determined to do so for our
customers and colleagues.
Thank you to our customers for choosing to bank with us
and to my colleagues for their dedication this year. We look
forward to continuing to serve you in 2024.
Ross McEwan CBE,
Group Chief
Executive Officer
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2023 Annual Report
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This section outlines how NAB seeks to create value through our strategy, summarises NAB’s sustainability approach and provides an update on performance across key themes. •Our business (page 12)•Strategy (page 13)•What we will be known for (pages 14 to 17)•Operating environment (pages 18 to 19)•Creating value (page 20)•Sustainability approach (pages 21 to 25)•Customers (pages 26 to 29)•Colleagues (pages 30 to 36)•Climate change and environment (pages 37 to 42)•Technology, data and security (pages 43 to 46)•Helping our communities prosper (pages 47 to 55)•Respecting human rights (pages 50 to 52)• Environmental, Social and Governance (ESG) risk management (pages 53 to 55)NAB provides supplementary sustainability-related disclosures in its standalone 2023 Climate Report and 2023 Sustainability Data Pack, available at: nab.com.au/annualreportsCreating value
Corporate and Institutional Banking
Disciplined growth
Corporate and Institutional Banking partners with customers
globally to meet their most complex financial needs providing
a range of products and services globally with offices in
Australia, Asia, London, Paris, and New York.
For 20 years, support has been provided to organisations
through sustainable financing and more recently navigating
the transition to net zero. Thanks to this work NAB has
retained its position as the number one Australian Bank
for global renewables transactions. NAB’s carbon markets
business has commenced trading and sustainable finance has
grown to more than $10 billion.
By further investing in Transaction Banking and Payments,
Corporate and Institutional Banking has maintained market
leading positions in cash and liquidity management. NAB
is ranked first in the Relationship Strength Index rating
for Transaction Banking, Foreign Exchange, Interest Rate
Derivatives and Debt Capital Markets(2)(3).
Bank of New Zealand (BNZ)
Personal and SME
BNZ serves more than 1.2 million customers across New
Zealand with personal and business banking services, through
a nationwide network of customer centres, digital and
assisted channels. It is New Zealand’s largest business bank,
one of the largest providers of agricultural financing and has
continued to gain market share in personal and business
segments. During 2023 BNZ has increased its focus on helping
New Zealanders and businesses navigate continued economic
uncertainty. It also provided support to customers during
recent flooding and cyclone events.
Our business
We are here to serve customers well and help
our communities prosper. More than 38,000(1)
colleagues provide about 10 million customers
with secure, easy and reliable banking services.
Customer-facing units reflect the needs of customers and
opportunities for safe growth. The four customer-facing units
are supported by enabling units. These are Technology and
Enterprise Operations; Digital, Data and Analytics; Finance;
Risk; Commercial Services, People and Culture and the Chief
Operating Office. ubank operates as a customer-facing unit
under the leadership of the Chief Operating Office.
Business and Private Banking
Clear market leadership
Business and Private Banking focuses on NAB's priority
small and medium (SME) customer segments. This includes
diversified businesses, as well as specialised Agriculture,
Health, Professional Services, Franchisees, Government,
Education and Community service segments, along with
Private Banking and JBWere.
NAB works to deepen relationships with business customers
as a trusted advisor in a dynamic economic environment.
This year Business and Private Banking delivered more
efficient processes such as digitised lending and deposits.
The merchant offering has been strengthened, and a more
integrated whole-of-NAB proposition for High Net Worth (HNW)
clients created. As Australia’s largest business bank, NAB has
grown faster than the overall banking system in business
lending and business deposits during 2023.
Progress to build a better business banking experience for
customers and colleagues continues.
Personal Banking
Simple and digital
Personal Banking helps customers secure a home loan and
manage personal finances through deposits, credit card or
personal loan facilities. It includes the Citi consumer business,
acquired in 2022.
In the face of rising costs of living, Personal Banking
has prioritised customer service by proactively contacting
customers to offer support when there are signs they may
be in difficulty. This has helped many customers get back on
their feet.
Personal Banking maintains a strong regional presence
with more than half our branches located in regional
and rural Australia. NAB serves customers through the
mobile app, internet banking, branches and phone banking.
NAB's Bank@Post partnership with Australia Post provides
customers with access to a range of banking services across
3,400 locations.
In 2023, NAB introduced a number of new initiatives to help
protect customers from scams and fraud including removing
links in text messages, increasing prompts for in-app
payments and improved card features to block transactions.
(1) Number of full-time equivalent colleagues as at 30 September 2023, excluding discontinued operations.
(2) Peter Lee Associates - 2023 surveys: Large Corporate and Institutional Transaction Banking, and Debt Capital Markets.
(3) Peter Lee Associates - 2022 surveys: Foreign Exchange and Interest Rate Derivatives Ranking against the four major domestic banks.
12
National Australia Bank
Strategy
Strategic ambition
To serve customers well and help our
communities prosper.
NAB's strategic focus is on clear market leadership for
Business and Private Banking; simple and digital experiences
for Personal Banking; disciplined growth for Corporate and
Institutional Banking; personal and SME growth for BNZ, and
digital customer acquisition through ubank.
During the year NAB has made progress on the integration of
acquired businesses. The completion of the 86 400 integration
into ubank has delivered positive results, with an increase
in the customer base and improved customer advocacy.
Completing the integration of the Citi consumer business
remains a priority. We have maintained prudent balance sheet
settings including capital levels above our target range and
strong provisioning coverage.
Disciplined execution of our strategy continues to be our
focus. Our goal is to be ranked number one in NPS(1) among
the major Australian banks and to have our NPS in a positive
territory. As at 30 September 2023, NAB was:
• Consumer: Ranked first in NPS among the major Australian
banks(1)(2).
• Corporate & Institutional: Ranked second in Relationship
Strength Index (RSI)(3).
• Business: Ranked second in NPS among the major
Australian banks(1)(4).
• High Net Worth and Mass Affluent: Ranked equal second in
NPS among the major Australian banks(1)(5).
While there have been some improvements across customer
segments there is more work to be done across the business
to consistently deliver excellence for customers and improve
these outcomes.
NAB achieved a colleague engagement score of 78 in the
July 2023 survey, the highest since setting the strategy in
2020. NAB's average colleague engagement score for 2023
increased to 77(6) (2022: 76).
For the year ended 30 September 2023, diluted cash earnings(7)
per share amounted to 238.0 cents, with cash return on
equity(7) of 12.9%. NAB has determined dividends for the year
of 167 cents per share, an increase of 10.6%.
Disciplined execution and doing the basics well will be critical
in delivering better outcomes for colleagues and customers.
This will be supported by continued strengthening of NAB's
technology, digital and data capabilities.
Delivering financial crime requirements and protecting
customers is a critical priority for 2024. This includes delivering
the agreed plan for the Australian Transaction Reports and
Analysis Centre (AUSTRAC) Enforceable Undertaking (EU), anti-
money-laundering and counter-terrorism financing (AML/CTF)
compliance. In addition, we will strengthen ways in which we
protect customers from scams and fraud.
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(1) Net Promoter® and NPS® are registered trademarks and Net Promoter Score and Net Promoter Systems are trademarks of Bain & Company, Inc., NICE Systems, Inc., and
Fred Reichheld.
(2) Sourced from DBM Consumer Atlas (part of RFI Global), measured on 6 month rolling average to September 2023. Consumer NPS excludes consumers with Personal
income of $260k+ and/or investible assets $1m+. Ranking based on absolute scores, not statistically significant differences.
(3) Peter Lee Associates – Large Corporate and Institutional Relationship Banking Survey Australia 2023. Ranking against all banks included in survey.
(4) Sourced from DBM Business Atlas (part of RFI Global), measured on 6 month rolling average to September 2023. Business NPS is based on equal (25:25:25:25) combined
weighting of NAB turnover segments: Micro (Up to $100k turnover), Small ($100k - $5m turnover), Medium ($5m - $50m turnover), Large ($50m+). Ranking based on
absolute scores, not statistically significant differences.
(5) Sourced from DBM Consumer Atlas (part of RFI Global), measured on 6 month rolling average to September 2023. Based on all consumers, 18+, in either High Net Worth
definition or Mass Affluent definition and on equal (50:50) combined weighting of included segments. Mass Affluent includes consumers with Personal income of $260k+
and investible assets less than $2.5m and/or investible assets $1m<$2.5m, High Net Worth includes consumers with Investible assets of $2.5m+. Ranking based on
absolute scores, not statistically significant differences.
(6) 2023 Heartbeat Surveys conducted by Glint, score based on an average of the four surveys conducted in November 2022, February 2023, May 2023 and July 2023.
Includes Australia and New Zealand colleagues, excludes external contractors, consultants and temporary colleagues.
(7) Full detail on how cash earnings is defined, a discussion of non-cash earnings items and a full reconciliation of statutory net profit attributable to owners of NAB is set
out in Note 2 Segment information of the Financial Report on page 169. Statutory return on equity and statutory earnings per share (EPS) are presented on page 106.
2023 Annual Report
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What we will be known for
Building better customer relationships
through expertise, support and insights.
A more personalised experience
NAB is investing in data and analytical capabilities to
make banking more personal for customers. This includes
personalised loyalty rewards, spending insights and faster
credit decisions based on what we already know about our
customers. Customers across the NAB and ubank brands
can set savings goals on their accounts to work towards
milestones and purchases that are important to them.
To assist small business customers, NAB has launched the
digital Small Biz Explorer experience which assesses business
customers’ needs and recommends relevant products
and services.
BNZ rewards was launched as a new loyalty and rewards
proposition for customers, and won the Canstar Most
Satisfied Customers – Rewards Credit Card award.
Relationship-led
Relationships are our strength. NAB strives
to deliver the best banking experience for
customers through these relationships.
Developing exceptional bankers
NAB’s Career Qualified in Banking (CQiB) program continues
to build colleagues' professionalism. Our aim is to have
Australia’s most qualified bankers to help build better
customer relationships. In partnership with Financial Services
Institute of Australasia (FINSIA), NAB has enrolled more than
20,000 colleagues across the life of the program. More than
14,500 colleagues have now successfully graduated from the
program, up from 8,000 in 2022.
Investment in leaders continues through Distinctive
Leadership – the approach to leadership for everyone at
NAB. 92% of people leaders have completed Distinctive
Leadership training workshops – an increase from 69% in 2022.
In 2023 the Distinctive Leadership experience was extended
to all colleagues (not just people leaders) through digital
learning modules.
NAB is investing in specialist banker capabilities, including:
• NAB’s lending academy, developing future Home
Lending Executives.
• NAB's retail customer advisor learning pathway, a 6-month
blended learning pathway supported by a dedicated
Learning Mentor.
• NAB's re-designed Home Lending Fundamentals program,
a secured lender accreditation program focused on
skills broader than home lending, including customer
conversation practice, time to practice on tools and
greater alignment with ways of working.
• Agribusiness climate banker training (in partnership
with Melbourne Business School) to over 350 of our
business and private bankers and establishing a Corporate
and Institutional Banking network of more than 100
sustainability champions.
• BNZ bankers have been trained as Nominated
Representatives to meet obligations under the Financial
Services Legislation Amendment Act.
14
National Australia Bank
Modernising our technology to help
serve customers faster and improve
the experience.
What we will be known for (cont.)
Easy
Customers expect better banking experiences,
so NAB is making banking easier and faster for
them.
Simple products and a seamless experience
NAB is working to make all our products easy to understand
and use. In 2023, this work included more ways to manage
home loans online, in-app notifications and expansion of
digital wallet capabilities.
Since the launch of NAB Messaging, NAB has served more than
500,000 customers through the channel, helping them manage
banking enquiries in their own time. Customers can now 'leave
a message' for NAB to respond to and get on with their day.
NAB is building towards a one-way home lending application
experience across all channels and an improved experience
for customers, colleagues and brokers. NAB has demonstrated
strong progress towards its aim of delivering Australia’s
simplest home loan with 70% of all proprietary home loans and
15% of broker home loans now submitted via Simple Home
Loans (SHL). ~70% of retail home loans submitted via SHL
achieve time-to-unconditional-approval in less than a day(1),
while most of our broker customers receive unconditional
approval same-day through SHL.
Following the completion of the 86 400 integration in 2023,
ubank customers can link accounts from other banks,
superannuation and investment providers to see a full picture
of their wealth.
BNZ has delivered innovative solutions to help make it simpler
and easier for customers to manage their finances. BNZ’s easy
to use online repayment features enable customers to
manage their mortgage repayments online. BNZ’s recently
launched MyProperty empowers customers with more
information so they can better plan ahead for future interest
rate changes. BNZ has simplified fees across a range of
products, including removing international payment fees and
monthly account fees on BNZ’s TotalMoney account.
Faster and decisive banking
Modernising NAB's technology is helping our colleagues serve
customers faster. Home loan approval times for customers
and brokers have improved, while automation and process
improvements reduced onboarding time for Corporate and
Institutional customers in 2023.
NAB’s instant credit decisioning capabilities are critical to
providing customers with speed and certainty when they
apply. A key focus has been on automating the customer
authentication and verification journey, and pre-filling known
customer data in applications. These improvements save time
and make it easier for customers when applying for
transaction accounts, savings and new products like NAB Now
Pay Later.
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(1) Median average time
2023 Annual Report
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Protecting customers and colleagues
through financial and operational resilience.
Protecting customers from scams and fraud
and financial crime
For more information on how we are helping protect
customers, their data and our systems refer to:
Further details on Financial crime on page 46.
Further details on how NAB is protecting its customers
against scams and fraud on page 27.
More information is available on the NAB website at:
nab.com.au/about-us/security.
What we will be known for (cont.)
Safe
A responsible and secure business is essential to
protect our customers and colleagues.
Strong balance sheet
The Group implemented Australian Prudential Regulation
Authority's (APRA) revised capital framework on 1 January
2023 and the Group remains well capitalised. The Common
Equity Tier 1 (CET1) capital ratio remains strong at 12.22% on
an APRA basis, with a capital surplus to the Group’s CET1
target range of 11.00-11.50% and strong provisioning levels
(collective provisions at 1.47% of credit risk weighted assets).
On 28 February 2023, the Group completed the $2.5 billion
on-market capital buy-back announced in March 2022. On
15 August 2023, the Group announced a further $1.5 billion
on-market capital buy-back, which commenced on 29 August
2023. A total of $0.9 billion of ordinary shares have been
bought back and cancelled during 2023.
The Group maintains a strong funding and liquidity position,
with a September 2023 quarterly average Liquidity Coverage
Ratio (LCR) of 140% and 30 September 2023 Net Stable Funding
Ratio (NSFR) of 116%. This is supported by $40 billion(1) of term
wholesale funding issuance during 2023 financial year as the
Initial Allowance of the Term Funding Facility matured.
Resilient technology and operations
NAB’s strategy is to develop leading resilient technology so
that customers and colleagues can depend on us. There has
been significant progress in reducing service interruptions
with the number of critical and high incidents dropping 83%
since 2018.
In 2023, NAB intensified focus on security in the face of ever-
escalating cyber threats. This year 33 initiatives have been
completed as part of a bank-wide strategy to address the
global scam epidemic, including removing links in unexpected
texts to customers. This work follows efforts by NAB, together
with telecommunications providers, to prevent spoofing
scams by stopping criminals infiltrating and impersonating
phone numbers and legitimate text message threads.
Having a strong, capable and internal technology workforce
is a key enabler of its strategy. NAB continues to insource
key technology functions to get the right skills to operate
sustainably. The infrastructure insourcing program is largely
completed and the focus is now on further building strategic
skill sets in cyber, data, digital and artificial intelligence (AI)
which are critical to modern technology platforms. NAB's
India and Vietnam-based innovation centres are a significant
part of our strategy, increasing collaboration with Australia-
based teams.
In 2018, NAB adopted a "cloud first" strategy. Since then,
NAB has migrated over 77% of applications to cloud-based
platforms. This has been critical in building more resilience in
our systems.
(1)
Includes Funding for Lending Program (FLP).
16
National Australia Bank
What we will be known for (cont.)
Long-term
Protecting the long-term interests of customers,
colleagues, and communities.
Responding to societal challenges
NAB's ambition is to drive commercial responses to societal
challenges. Our priority areas are:
• Climate action (page 37 and in the Group's 2023
Climate Report).
• Affordable and specialist housing (page 29).
•
Indigenous economic advancement (page 28).
Tackling the biggest societal issues requires investment
across business, government and society, which is why NAB
is driving commercial responses and building partnerships.
Sustainable business practices
NAB needs to get the basics right by maintaining sustainable
business practices. NAB engages directly with stakeholders
and participates in external assessments to understand
views on our broad environmental, social and governance
(ESG) performance. Key focus areas within this strategic
pillar include:
• Colleagues and culture.
•
Inclusive banking.
• ESG risk management.
• Supply chain management.
• Human rights.
Information on how these areas are managed is outlined in
the What matters most section of this report on page 24.
NAB's 2023 Sustainability Data Pack(1) contains further detail on
performance in these areas.
Acting now for the long-term.
Innovating for the future
NAB is continually assessing and exploring innovation themes
that can deliver value to NAB and our stakeholders. In 2023,
NAB began piloting several use cases of generative AI to
improve colleague productivity and support bankers.
NAB has explored ways to help customers understand their
carbon emissions and partnered with Thriday to provide small
and medium business customers with additional insights on
their banking.
NAB's in-house venture capital fund, NAB Ventures, invests
in early-stage businesses with innovative technologies
and business models that address themes core to
NAB's strategic priorities. In 2023, NAB Ventures, made
investments in Banked (Account-to-Account payments),
Greener (sustainability platform) and Carbonplace (voluntary
carbon credits platform).
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(1) Available at nab.com.au/annualreports
2023 Annual Report
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Operating environment
Global business environment
Global economic growth has been volatile over recent
quarters. This is in part due to the impact of China’s zero-
COVID-19 policies, including a temporary bounce in the March
quarter 2023 following their removal. Overall, average growth
is expected to slow in calendar year 2023 and again in 2024,
before a modest upturn in 2025. Growth over this period is
expected to remain below the long-term average.
In part, the slowing trend for global growth reflects the impact
of the rapid tightening in monetary policy (together with more
restrictive lending standards by banks in many advanced
economies) since early calendar year 2022, intended to
control inflation. The outlook for China is weak, reflecting a
downturn in its property sector, while domestic consumption
and export demand is subdued.
Global consumer price growth has trended lower since the
cycle peak of September 2022, as supply side pressures
triggered by COVID-19 have gradually eased. However, inflation
remains above central bank targets in most regions and
global energy prices increased between late June and end of
September 2023.
The slowing inflation trend in advanced economies has
increased the likelihood that most major central banks have
either reached the end of their tightening cycle or are near
the peak.
Other risks to the outlook include the Russia-Ukraine war and
conflict in the Middle East (including the potential impact on
energy supply and prices) and geopolitical tensions between
the United States and China.
Australian economy
The Australian economy has continued to expand but growth
has slowed. While the labour market remains tight, and
inflation high, there are signs of easing labour market and
price pressures.
Gross Domestic Product (GDP), after solid growth of 0.7% in
the December quarter 2022, grew by a subdued 0.4% in both
the March and June 2023 quarters. By expenditure component,
between the September quarter 2022 and June quarter 2023:
• Household consumption was particularly subdued, only
growing 0.7%.
• Residential investment fell 1.9%.
• Business and government fixed capital investment, and
exports grew strongly. Export growth was assisted by a
continued recovery in overseas tourist and international
student numbers.
Most industry sectors grew between the September quarter
2022 and June quarter 2023, with only four out of the 19
broad industry groups (utilities, wholesale trade, retail trade
and professional services) seeing a fall in gross value added.
Similarly, over the same period, state final demand grew in
most state and territories, except for Tasmania and the
Northern Territory where it declined.
Inflation has eased but remains high. In the September quarter
2023, the annual growth rate in the Consumer Price Index (CPI)
was 5.4%, down from 7.8% in the December quarter 2022.
Household budgets have come under pressure from elevated
inflation and rising interest payments. Household disposable
income, after adjustment for inflation, declined by 4.2%
between the March quarter 2022 and the June quarter 2023.
Households have adjusted by slowing consumption growth
and reducing their savings rate. Business operating profits
have been volatile - while in the June quarter 2023 they were
11% below their June quarter 2022 level, reflecting a large fall in
18
National Australia Bank
mining sector profits, the average level over the four quarters
to June 2023 was 5.3% higher than in the previous year.
Agriculture conditions have been mixed. Prices have been
falling for over a year; in September 2023 the NAB rural
commodity price index was 34% below its June 2022 peak.
However, the 2022-23 winter crop is estimated to have been
the third consecutive record high, although a crop slightly
below its average of the ten prior years is expected in 2023-24.
The labour market remains tight, but there are signs of easing:
• The unemployment rate was 3.6% in September 2023,
low by historical standards but up slightly from October
2022 (3.4%).
• The number of job vacancies remained very high in the
September quarter 2023 but has come off its peak, aided
by strong population growth.
• The wage price index (excluding bonuses) grew by 3.6%
between the June quarter 2022 and the June quarter 2023,
up from 2.6% in the prior four-quarter period.
Dwelling prices have rebounded. After falling by 8.1% from their
peak in April 2022, the eight capital city CoreLogic Hedonic
Home Value Index increased by 7.9% between January 2023 and
September 2023.
With high inflation still weighing on households, and the
full impact of interest rate increases still coming through,
GDP growth is expected to remain subdued over the rest
of calendar year 2023 and 2024, leading to a rise in the
unemployment rate.
The RBA increased the cash rate from 0.1% in April 2022 to 4.35%
in November 2023. If the economy evolves as expected, the
cash rate is likely at or near its peak, with the possibility of rate
cuts starting from around the end of calendar year 2024.
Annual system credit growth has eased. Between September
2022 and September 2023:
• Housing and non-financial business credit growth slowed to
4.2% and 6.4% respectively (from 7.4% and 13.3% over the year
to September 2022), only partially offset by stronger other
personal credit growth (2.3%, up from -0.2%).
• However, housing credit growth may have stabilised, with
the monthly growth rate largely unchanged since the end
of calendar 2022.
New Zealand economy
Growth in the New Zealand economy has slowed in recent
quarters. While GDP increased by 0.9% in the June quarter 2023,
over the last three quarters it only grew by 0.3%. The quarterly
pattern of growth has been affected by the severe weather
events that impacted the North Island in January (flooding)
and February (Cyclone Gabrielle).
The slowdown in growth has occurred even as population
growth has accelerated. Over the year to the June quarter
2023, the population grew by 2.1%, driven by high rates of net
inward migration.
The weakening in economic growth, together with strong
population growth, has seen labour market pressures ease,
with businesses reporting much less difficulty in finding staff.
In the September quarter 2023:
• Employment was 2.4% higher than in the September quarter
2022, slightly below growth in the working again population
(2.6%) over the same period.
• The unemployment rate was 3.9%, up from 3.2% in the
September quarter 2022 but still low by historical standards.
With the economy's capacity constraints abating, inflation has
gradually fallen, but it remains high. In the September quarter
Operating environment (cont.)
2023 annual CPI inflation was 5.6%, down from 7.3% in the June
quarter 2022.
Commodity export prices fell 11.1% between September 2022
and September 2023 in New Zealand dollar terms, this included
a 20.8% fall in dairy export prices. However, prices showed
signs of stabilising at the end of this period.
Housing market activity has stabilised. The REINZ House Price
Index fell 18% between November 2021 and May 2023, but has
since (to September) increased 2.8%. Sales volumes remain
low but have come off their trough of early 2023.
System credit grew by 2.4% over the year to September
2023, down from 5.6% over the year to September 2022 . This
reflected slower housing credit (3.0% over year to September
2023) and non-agricultural business credit (0.9%) growth,
although credit to agriculture, which had been negative,
turned positive (1.4%).
The RBNZ increased the Official Cash Rate (OCR) from 0.25%
to 5.50% between October 2021 and May 2023. The RBNZ is
expected to remain on hold for some time. While there is some
chance of the RBNZ tightening further, the most likely next
change in the OCR is a cut.
Looking ahead, economic growth is likely to be weak into
the first half of calendar 2024, before recovering, which
is expected to lead to an increase in the unemployment
rate. This outlook reflects the lagged impact of monetary
policy tightening, curtailed commodity income, reductions in
government spending, and weaker goods exports due to slow
global growth and weather-related reductions in agricultural
output. Fiscal policy settings are also uncertain with the
formation of a new government following October’s election.
Outlook
The outlook for the Group’s financial performance and
outcomes is closely linked to the levels of economic activity in
each of the Group’s key markets that are outlined above.
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2023 Annual Report
19
Creating value
NAB creates value for customers, colleagues and communities in a variety of ways through a variety
of resources.
Customer relationships
Colleagues
Finance
Customers choose NAB because we serve
them well
Trusted professionals who are proud to
be a part of NAB
Access to capital through deposits and
funding markets
NAB's key resources
Risk management and balance sheet
Technology and data capabilities
Community relationships
Strong foundations, and risk
management capabilities
Safe, resilient technology coupled with
the use of ethical data
Partnerships and
stakeholder engagement
NAB's business activities
NAB delivers its strategy (page 13) and creates value for stakeholders through the following business activities:
• Holding deposits for customers.
• Helping customers invest through online brokerage.
•
•
Providing transaction banking services.
Lending money to retail, business and
institutional customers.
•
•
Providing advisory services.
Investing in a capable, qualified and inclusive workforce.
• Helping NAB's customers, colleagues and their communities
• Helping customers mitigate and manage risk.
withstand and recover from natural disasters.
•
•
Providing commercial responses to society’s challenges.
Providing payments services and supporting customers with
trade and capital flows.
Supporting customers
•
$86 billion in new home lending.
The value NAB creates
•
$587 billion in deposits managed for
retail and business customers.
•
$88 billion in new business lending.
NAB's economic value distributed
Suppliers
Payments made for the provision of utilities, goods and services.
$6.2 bn
Community investment
Community partnerships, donations, grants, in-kind support and volunteering.(1)
$79.2 m
Shareholders
Dividend payments to more than 596,000 registered shareholders.
$5.0 bn
Colleagues
Colleague salaries, superannuation contributions and incentives.
$5.3 bn
Governments
Payments made to governments in the form of the Bank Levy ($372 million paid)
plus $3.6 billion in income taxes, goods and services taxes, fringe benefit taxes
and payroll taxes among others.
Total economic value distributed
$4.0 bn
$20.6 bn
(1) This includes foregone fee revenue, management costs, cash contributions and in-kind contributions. For a detailed breakdown of the categories included within the
Group's community investment, see the 'Community' tab in the 2023 Sustainability Data Pack.
20
National Australia Bank
Sustainability approach
Sustainability in NAB's strategy
The future depends on acting now for the long-term.
NAB employs more than 38,000(1) colleagues, serves about 10 million customers and is connected to communities across Australia
and New Zealand. That scale and connectivity is critical to NAB's ability to drive positive change. Sustainability is embedded in the
long-term pillar of NAB's strategy in recognition of the impact that successfully managing sustainability matters can have on our
business and the environment and communities we operate in.
NAB has prioritised the areas where it can have the biggest positive impact. NAB determined these priority areas through
its sustainability materiality process and impact analysis following guidance of the United Nations Principles for Responsible
Banking (UN PRB). The Group’s approach to managing climate-related risks and opportunities is detailed in the standalone
Climate Report(2).
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(1) Number of full-time equivalent colleagues as at 30 September 2023, excluding discontinued operations.
(2) Available at nab.com.au/annualreports.
2023 Annual Report
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Sustainability approach (cont.)
Sustainability governance and performance
The challenges and opportunities of sustainability require a whole of Group response. Sustainability is embedded in NAB's
governance structure, as outlined below. The Board retains ultimate accountability for the oversight of sustainability-related
risks and opportunities and receives regular updates on sustainability performance.
Further detail on the Board and Board committee activities in 2023 is available in the Corporate Governance Statement section
of this report.
22
National Australia Bank
(1) NAB’s major subsidiary, BNZ, also has sustainability-related (including climate) management groups and councils. Details on BNZ’s approach to relevant governance matterswill be available in its climate and sustainability reporting.(2) NAB’s Indigenous Advisory Group is comprised of representatives from the Board, Executive Leadership Team and Aboriginal and Torres Strait Islander leaders from outsideNAB. First Nations colleagues are members of the RAP committee. Executive Leadership TeamOversees sustainability-related (including climate) strategy and opportunities. Sustainability-related management groups and forumsComprised of representatives from across NAB’s businesses to align and drive progress in NAB’s priority sustainability areas.(1) The Group has established a number of Executive level groups and forums designed to drive enterprise collaboration, alignment and visibility on strategy, innovation, opportunities, execution activities and emerging risks (described below). The chairs of the below groups and forums provide periodic reporting to the Executive Leadership Team (ELT) and Board and have the power to refer matters of significant importance to the Group Chief Executive Officer (CEO), relevant BEAR accountable persons or the ELT.BoardSustainability Council Chair: Les Matheson, Group Chief Operating Officer Remit: NAB’s over-arching strategic direction as it relates to sustainability performance. Considers stakeholder expectations and NAB’s voluntary obligations.Group Climate Governance Forum Chair: Jacqueline Fox, Chief Climate OfficerRemit: NAB’s strategic response to climate change and transition to a low carbon economy.Affordable Housing Council Chair: Cathryn Carver, Executive, Client Coverage Remit: Drives strategy and actions related to NAB’s response to affordable and specialist housing. Includes supporting targeted partnerships and progress.Indigenous Advisory Group(2) Co-Chair: Ann Sherry AO, NAB Non-Executive Director & Tanya Hosch, AFL Executive General Manager of Inclusion and Social PolicyRemit: NAB’s formal Indigenous Advisory Group provides strategic guidance on NAB’s engagement with Aboriginal and Torres Strait Islander people and NAB’s Reconciliation Action Plan. It is supported by a management-level RAP committee.Group Credit & Market Risk CommitteeThe Group Credit and Market Risk Committee is an executive level risk management committee which has oversight of certain financial risks and ESG risks (including climate and human rights related risks), and the Group’s environmental compliance and performance. Refer to the Risk Management section for further information on Risk Management committees.The Board Risk & Compliance Committee oversees ESG risks (including climate and human rights-related risks) and the Group’s environmental compliance and performance reported and escalated by management.Board and Board committeesAccountable for ESG Strategy and oversight of ESG matters, including any escalated from Board committees. Board Audit CommitteeBoard People & Remuneration CommitteeBoard Risk & Compliance CommitteeBoard Customer CommitteeBoard Nomination & Governance CommitteeIndependent assurance & advice Policies, systems and processesRisk ManagementStrategy, purpose, values & culture7-504 NFN2651 - Governance Diagrams - Update_1A October 31, 2023 11:19 am Sustainability approach (cont.)
Stakeholder engagement
Effective stakeholder engagement helps NAB
to understand what is expected of the bank,
identify issues, advocate for changes in policy
and discover opportunities to improve.
NAB's approach to stakeholder engagement, including
processes for consultation on sustainability topics, is set
out in its Sustainability Policy and informed by the AA1000
Stakeholder Engagement Standard. NAB aims to be respectful,
responsive, open and authentic with all stakeholders.
Engaging on sustainability:
NAB values constructive feedback on issues and drives
progress on the sustainability topics that matter to NAB, the
customers it serves and the community. Key discussions this
year have included:
• Climate change and transition, including NAB's position
on lending to fossil fuels – as well as biodiversity and
natural capital.
• Supporting the ambitions and progress of First Nations
people – primarily through better banking services,
particularly to Indigenous businesses.
• Consumer issues such as cost of living, the impact of
scams and fraud, financial vulnerability (including Buy Now
Pay Later regulation), cyber security and privacy.
Stakeholders
Customers
Colleagues
Engagement activities
Market research, including customer satisfaction and experience surveys and focus groups, customer
advocacy groups, engagement with the ELT, Sustainability teams and Board Customer Committee.
Heartbeat surveys, intranet articles and social media, confidential alert lines and interactive events
with the ELT.
Shareholders, investors
and analysts
Annual General Meeting (AGM), investor presentations and analyst briefings, survey participation,
direct engagement with the ELT, Investor Relations and Sustainability teams.
Suppliers
Industry bodies
and associations
Relationship management, surveys (as part of due diligence processes and annual engagement
activities) and industry forums.
Relationship management, participation in consultation and advocacy processes.
Regulators and government
Regular meetings and briefings, participation in consultation processes and inquiries, focus groups
and workshops.
Non-government
organisations (NGOs) and
community partners
Research, surveys and interviews, not-for-profit customers and social enterprise support, meetings,
conferences, events and workshops, employee volunteering (skilled, general and remote), workplace
giving, donations and fundraising, grants and sponsorship, ethical and impact investing.
Industry associations
Engaging on public policy
In 2023, NAB engaged on key topics including climate and
nature-related financial disclosures, such as:
• Working with the Australian Banking Association (ABA)
on the Federal Department of Treasury’s proposals for
the implementation of standardised, internationally-aligned
climate-related financial disclosures.
•
Involvement in the United Nations Environment Program
Finance Initiative (UNEP FI) Taskforce on climate-related
financial disclosures (TCFD) Forum, including review of tools
and data sets being developed for climate-related risk
analysis, and updates on climate-related litigation.
• Task Force on Nature-related Financial Disclosures
(TNFD) forum and also part of UNEP FI piloting of
the recommendations of the TNFD framework on
freshwater bodies.
NAB was the only Australian company to participate in the
United Nations Global Compact's (UNGC) Think Lab on Just
Transition (“Think Lab”). NAB contributed to the Think Lab's work
to shape business and thought leadership on critical areas
linked to just transition.
Many of the issues that impact NAB's ability to serve
customers well cannot be addressed by any one company.
Our key industry association memberships and payments for
2023 were:
• Australian Banking Association (ABA): $2,313,382
• Business Council of Australia (BCA): $95,000
• New Zealand Bankers' Association: NZ$426,934
• BusinessNZ: NZ$22,000
NAB engages government and regulatory bodies to provide
input and help shape policy on sustainability issues that are
important to NAB. In 2023, this included:
• Engagement with Minister of Indigenous Affairs on
economic advancement.
• Participation in cross-sector Government roundtables
on scams and consultation with Government and the
Australian Competition and Consumer Commission (ACCC)
on launch of the National Anti-Scam Centre.
• Engagement on affordable housing, including CEO
participation in Federal Treasury’s Investor Roundtable
meetings on affordable housing and residential energy
efficiency and sustainable finance.
• Submission on the Australian Cyber Security Strategy
(2023-2030) discussion paper and engagement with the
Government’s expert advisory council on cybersecurity.
See page 14 of NAB's 2023 Climate Report for detail on NAB's
climate-related advocacy.
NAB’s political contributions policy means it does not make
political donations to any political party, parliamentarian,
elected official or candidate for political office. However,
NAB representatives may pay to attend political events and
business forums hosted by major political parties. In 2022
(period 1 July 2021-30 June 2022), NAB spent $60,500 with
the Australian Labor Party, $60,000 with the Liberal Party of
Australia, and $33,000 with the National Party of Australia.
These payments are disclosed to the Australian Electoral
Commission (AEC) in line with State and Federal regulation,
noting the AEC’s reporting year is a different period to NAB’s
financial year. NAB’s 2023 contributions (period July 2022- June
2023) will be available via the AEC in February 2024.
2023 Annual Report
23
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Sustainability approach (cont.)
What matters most
ESG materiality assessment
NAB's annual ESG materiality assessment is designed to
identify and prioritise the ESG areas of most relevance
to NAB's performance, its stakeholders, and where it can
potentially have the biggest impacts on society. The
outcomes guide reporting and decision-making, to help NAB
address the ESG topics that matter most.
NAB’s definition of ESG materiality considers the areas where
NAB’s business activities impact the economy, environment
and people. It also considers the ESG issues with the potential
to impact enterprise value, including through influence on
stakeholder decision-making.
The process draws on external frameworks and resources,
such as the UNEP FI Impact Radar, as well as reporting
frameworks (e.g. Global Reporting Initiative, Sustainability
Accounting Standards Board) and ESG benchmarks and ratings
(e.g. MSCI. Sustainalytics, Dow Jones Sustainability Index).
NAB's engagement with stakeholders as outlined on page
23 informs the approach. This includes analysing feedback
through existing channels, and specific engagements to
discuss ESG matters of importance. Insights are reviewed
against our strategic priorities and industry guidance.
The materiality assessment involves the following four stages:
This helps prioritise the issues that matter. Outcomes of
this review are provided to the Group's Board of Directors
for consideration.
2023 ESG materiality outcomes
While NAB's material ESG themes remain unchanged from 2022,
the prevalence of some sub-topics and measures reported
have shifted. In 2023, key changes included rising cost of
living pressures, increase in cybercrime, scams and fraud,
approach to a just transition, increasing expectations on
management of nature-related risks and opportunities, and
protecting customer privacy.
Principles for Responsible Banking (PRB) self-
assessment
As a founding signatory of the PRB, NAB seeks to align its
business activities to have a positive impact on society.
For detail on NAB's progress against the PRB see its year
three self-assessment on nab.com.au.(1)
BNZ will publish its PRB self-assessment at the end of
calendar year 2023.
2023 ESG material themes
1. Supporting customers
NAB is here to serve customers well and help our
communities prosper. NAB is becoming a simpler, digital
bank that gets things done for customers.
2. Managing climate change
Taking decisive action on climate change and
environmental sustainability. Climate action is
everyone's job.
3. Governance, conduct and culture
Being transparent, making ethical decisions and
embedding accountability throughout the Group.
4. Colleague engagement, inclusion and capability
NAB's more than 38,000 colleagues are central to our
business. NAB is focused on supporting wellbeing, building
capability and an inclusive culture to be proud of.
5. Data security, technology and innovation
Maintaining resilient, reliable and secure systems oriented
to customer outcomes and experience.
Scams and fraud (page 27)
Financial hardship (page 27)
Sub-topics
• Customer advocacy (pages 13 to 17)
• Complaint management/remediation (page 50)
•
• Customers experiencing vulnerability (page 27)
•
• Affordable housing (page 29)
•
•
•
•
•
• Operational environmental performance
Indigenous business (page 28)
Financing the transition to net zero
Sustainable finance
Biodiversity and natural capital
Just transition
Summarised information can be found on pages 37 to 40. See
the Group's 2023 Climate Report for more detail.
• Code of Conduct (pages 82 to 83)
• Clear accountability (page 82)
• Culture and How We Work (page 81)
•
Executive remuneration (page 81)
• Capability, including leadership (pages 31 to 32)
Talent attraction and retention (pages 31 to 32)
•
•
Inclusion and diversity (pages 32 to 35)
• Health, safety and wellbeing (page 36)
•
• Use of data, privacy and ethics (pages 43 to 45)
•
•
•
IT security (pages 16 and 43)
Innovation (pages 16 and 43)
Stability (pages 16 and 43)
Employee/Industrial relations (page 36)
(1) See NAB's self-assessment at nab.com.au/about-us/social-impact/shareholders/performance-and-reporting.
24
National Australia Bank
Sustainability approach (cont.)
Sustainability scorecard
The targets and key measures below show the Group’s progress in meeting goals aligned to the sustainability areas that matter
most. NAB's 2023 Sustainability Data Pack and 2023 Climate Report is available at nab.com.au/annualreports.
2023 Sustainability scorecard
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2023 Annual Report
25
Customers
Serving customers well is a core part of NAB's
strategy. Whether it is helping provide access
to banking for someone who needs additional
support, or being there when times are tough,
our message to any customer is that we are here
to help.
Supporting customers in changing
economic conditions
The NAB Assist team is the main point of contact for
personal and small business customers experiencing financial
difficulty. This team will tailor assistance to each customer
and their circumstances.
In the current economic environment the main reasons
for hardship include expenses, unemployment and
underemployment. NAB is more frequently reviewing loans
and getting in touch with customers so they can prepare
for any changes in repayments. For example, for customers
who are rolling off low fixed rates, NAB has developed a
digitised fixed rate rollover process with pricing based on their
individual circumstances.
Through NAB Assist, customers are offered personalised care
including free financial counselling and wellbeing support.
These offerings extend to reduced repayments, payment
breaks, loan reviews and restructures tailored to each
situation. In 2023, NAB has provided customers with financial
support on 15,354 accounts.
Investing in systems and partnerships
NAB has invested in new ways to support customers and
improve outcomes for those experiencing financial difficulty:
• NAB strengthened its online offering to improve the digital
form that enables customers to apply for financial hardship
without calling a contact centre. In the last year NAB
customers have requested hardship assistance on 6,450
accounts via the online form. This form supports increased
customer demand during times of natural disaster and the
provision of relief.
• NAB works with third party representatives such as Way
Forward and financial counsellors to support customers
experiencing financial difficulty.
• NAB has implemented a cost-of-living training program for
colleagues to improve customer conversations.
NAB is here to help. We are investing
in new ways to support customers and
improve outcomes for those experiencing
financial vulnerability.
Supporting customers
experiencing vulnerability
The NAB Assist Customer Support Hub supported 2,635
customers experiencing vulnerability including domestic and
family violence, scams, financial abuse, problem gambling
and other challenging circumstances, as outlined in NAB's
Customers Experiencing Vulnerability Framework 2021-2023(1).
Reducing financial abuse in all its forms
Taking extra care of customers experiencing financial abuse
is a priority. Identifying these customers earlier to provide
the right support is a key focus at NAB. Some examples in
2023 include:
• NAB has a zero tolerance approach to financial abuse and
terms and conditions have been updated to reflect this.
•
Improved detection and prevention of abusive messages
in transaction descriptions, with almost 14,000 messages
blocked per month in mobile app and internet banking.
Customers sending serious threatening messages are
being investigated, warned and in some cases may
be exited.
Disaster relief
NAB’s Ready Together program supported customers
impacted by natural disasters with $557,000 in cash grants
during the year. The grant application process has also been
made easier with a new online application form for customers
to apply for an emergency relief grant. Refer to page 48 for
more information on the NAB Ready Together program.
Quick link
nab.com.au/customersupport
(1) Available at nab.com.au/content/dam/nabrwd/documents/guides/corporate/customer-vulnerability-framework-21-23.pdf.
26
National Australia Bank
Customers (cont.)
Accelerating our efforts to protect
customers against scams and fraud
NAB is taking action to reduce the impact of scams and fraud
on customers. NAB received an increase in customer enquiries
this year in relation to scams and fraud, with an average of
1,500 scam cases impacting NAB customers per month, an
increase of 74% compared to 2022.
NAB is investing in initiatives aimed at preventing fraud, scams,
financial and cyber crime for customers. As at September
2023, 33 initiatives have been completed as part of a bank-
wide strategy to help address the global scam epidemic.
These include:
• Adding more than 70 dedicated scam and fraud team
members this year creating a team of more than 470
colleagues in the Group Investigations and Fraud team,
assisting to support 24/7 customer account monitoring for
signs of suspicious activity.
• Working with telecommunication providers to reduce
the impact of criminals attempting to infiltrate and
impersonate NAB phone numbers and legitimate text
message threads.
• Removing links in text messages to protect customers. NAB
became the first major bank in Australia to replace links
in text messages with advice directing customers to NAB's
website, to call NAB, or head to internet banking or the NAB
app to take specific action.
•
•
Introducing customer payment alerts to the mobile app
and internet banking to encourage customers to stop and
think before making payments. This intervention has seen
$40 million worth of payments subsequently abandoned.
Implementing new customer protections to block
payments to some high-risk cryptocurrency exchanges
where scams are more prevalent.
• Played a leading role in the creation of the Australian
Financial Crimes Exchange (AFCX) Fraud Exchange Platform
(FRX). This is a digital platform helping banks exchange
information in real-time, improving the possibility that
scammed funds can be frozen and returned to customers.
• Ran more than 110 free security education webinars
throughout the year. These sessions are free to all
Australians, not just NAB customers.
With the application of various initiatives, NAB has prevented
and recovered more than $200 million in scam losses for our
customers over the last two years.
NAB’s message to customers is to stay alert, curious and
educated on scams and fraud.
Inclusive banking
Supporting low-income customers
A significant number of people in Australia and New
Zealand experience difficulties accessing financial services(1).
NAB works to support customers through inclusive
banking practices.
NAB and Good Shepherd Australia New Zealand (Good
Shepherd) have worked together since 2003 to help
Australians manage their money better and serve those at
risk of exclusion from mainstream banking services. The
partnership began through NAB’s support of microfinance
initiatives aiming to support people on low incomes – mainly
the No Interest Loans (NILs) program.
It is one of NAB’s longest-standing corporate
community partnerships.
Since 2003, NAB has provided zero-interest capital to enable
almost 380,000 microfinance loans, worth $482.6 million.
In doing so, NAB has helped almost one million Australians
on low incomes, primarily through access to loans with no
interest or fees.
In 2023, NAB provided support to help build financial inclusion
across Australia by supporting more than 87,000 Australians
with 40,940 NILs totalling $68.6 million, including support for
10,575 Indigenous customers(2)(3).
Accessibility
NAB’s new Accessibility Action Plan 2023 – 2024 available
at nab.com.au/about-us/accessibility-inclusion was launched
this year, providing a roadmap for improved inclusion
and accessibility for customers, colleagues and community
members. In 2023, NAB was awarded third place in the Access
and Inclusion Index by the Australian Network on Disability. The
action plan focuses on three key goals:
1. Work towards being an employer of choice for people
with disability.
2. Help our communities prosper by supporting disability
organisations and businesses to solve emerging issues.
3. Use data and insights from customers to listen, understand
and implement improved accessibility into their experience.
Some improvements made in 2023 are:
• Registering disability organisations on NAB neighbourhood
to access expert volunteering.
• Rolling out interpreter services for customers with limited
English across all contact centres.
• The Indigenous Customer Service Line has made
improvements to help indigenous customers experiencing
ID takeover and fraudulent transactions to ensure they are
authenticated more effectively, reducing the time taken to
resolve their issues.
• As more customers adopt digital banking, Bank@Post
continues to be a place where customers with
passbooks can withdraw money, including in regional and
rural locations.
(1) 28 Marjolin, A., Muir, K., and Ramia, I. (2017) Financial Resilience and Access to Financial Products and Services – Part 2, Centre for Social Impact (CSI) at UNSW Sydney, for
National Australia Bank.
(2) For breakdown of products included, see NAB's 2023 Sustainability Data Pack available at nab.com.au/annualreports. Number and dollar value of microfinance loans
written by NAB are assured by EY. NAB microfinance dollar value figures are provided in AUD.
(3) Number of people supported by a NILs loan includes dependents of loan recipients.
2023 Annual Report
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Customers (cont.)
• Progressively updating applications and documentation
with more inclusive gender and salutations fields.
• Enhanced customer focus in product governance and
risk assessment with a new Inclusive Product Guidance
tool for product owners and change managers to self-
assess a range of customer accessibility, inclusion and
vulnerability considerations.
Helping First Nations businesses prosper
NAB recognises the importance of the First Nations
business and community sectors. NAB has developed
specialist bankers and provides funding that can help First
Nations people prosper.
NAB was the first Australian corporate business to achieve
'Elevate' Reconciliation Action Plan (RAP) status for our
leadership in reconciliation.
NAB is developing its next three-year RAP for 2024-2026. It
builds on the ambition of NAB's previous RAP's, and ultimately
aligns with our objective to drive commercial growth in the
First Nations business sector, including through initiatives
aligned with key pillars; customers, colleagues and community.
Through its growing network of specialised bankers across
Australia, NAB will fund First Nations businesses and community
organisations eager to unlock their potential and grow.
NAB has set a target to more than double its lending to First
Nations businesses and community organisations to at least
$1 billion over the next three years(1).
NAB's team of specialist bankers support First Nations
businesses by:
• Providing sector, government policy, First Nations culture
and credit opportunity insights to the NAB banking team.
• Connecting NAB's customers to external business
advisors and financial capital providers from government,
philanthropists and NGOs.
• Deepening NAB's understanding of sector compliance and
regulatory requirements of First Nations businesses and
community organisations to effectively provide funding
and other banking services to ensure these entities grow
and thrive.
Working together with First Nations people, NAB:
• Partnered with six First Nations business chambers and two
government agencies towards delivering sector insights
and education.
• Delivered targeted First Nations cultural awareness
training to 89 business bankers, credit specialists, legal
practitioners, and banking associates.
• Created a dedicated First Nations Business Credit specialist
support team and in-depth credit coaching and support for
our network of Indigenous business bankers nationally.
We have developed and mandated our cultural awareness
training for Australian-based colleagues to help build their
understanding of Australia’s shared history, as well as NAB's
own initiatives and objectives and how these relate to the
work of our colleagues and their ability to support customers
effectively. Since the release of the training module, we have
achieved a 98% completion rate.
Supporting reconciliation
Our vision is for a reconciled Australia, where the gaps
between Aboriginal and Torres Strait Islander and non-
Indigenous Australians are closed. It’s a future where
Aboriginal and Torres Strait Islander people have the same
access to finance and employment— where First Nations and
non-Indigenous Australians and organisations work together
to build healthy, inclusive and sustainable communities
We support the ambitions and progress of First Nations
people. Our primary focus is providing better banking
services, particularly to Indigenous businesses in the
knowledge that jobs and economic opportunities drive
positive social outcomes.
Our RAP sets out the actions we are taking. In developing
and delivering our RAP, we consider the perspectives of our
Indigenous colleagues, customers and community partners –
to understand and our role in supporting them to succeed.
In this context, the NAB Board and Executive Leadership Team
made a unanimous decision, in 2022, to support constitutional
recognition of Indigenous people. In 2022-2023, a total of
$1.5 million in philanthropic grants were made to Australians for
Indigenous Constitutional Recognition (AICR), From the Heart
(via Cape York Foundation) and Uluru Dialogue. NAB respects
the democratic process and the views of shareholders,
colleagues and customers are broad and varied.
We seek genuine partnership with Aboriginal and Torres Strait
Islander colleagues, customers, and communities. By listening
to First Nations’ perspectives we will keep working to help
deliver better economic outcomes for First Nation Australians.
See page 33 for more information on NAB’s approach to
supporting First Nations colleagues.
NAB's "Walking together" Indigenous
star illustrates recognition of
Indigenous Australians' contribution
to culture, and NAB's ambition to
support their financial inclusion and
economic aspirations. The idea came
from proud Kamilaroi man and NAB
colleague Kieran Cain-Hall, and was
designed by Marcus Lee, a proud
Aboriginal descendant of the Karajarri
people from North Western Australia.
BNZ's Māori strategy
BNZ's objective is to serve Māori well and help Māori communities prosper and create a more inclusive economy. BNZ's
Māori strategy aims to build a strong wharenui (large house) and this is built on three pou (pillars).
Pou Tahi – Raising competency in Māori, improving response to Te Tiriti o Waitangi, cultural practice, te reo, Māori
leadership and recruitment.
Pou Rua – Facilitate solutions for Māori through business solutions, sustainability-linked loans, lending and
financial literacy.
Pou Toru – Influence the market for Māori business to prosper through iwi and public sector relationships.
(1) Lending target position refers to 'Gross Loans and Advances' as at the target of 31 December 2026 to customers who have been identified as an Indigenous business or
community organisation. Baseline position of $413.6m calculated as at 31 August 2023.
28
National Australia Bank
Customers (cont.)
Affordable and specialist housing
Affordable housing is a priority area of impact at NAB and a
critical issue facing customers and communities. In November
2022, NAB extended its efforts, targeting an additional $6 billion
in lending for affordable and specialist housing by 2029.
This includes accommodation provided by state and territory
governments and community housing providers through to
mixed tenure developments, commercial projects including
build-to-rent as well as government programs to support
home ownership essential workers, younger Australians and
those on low incomes.
During 2023, a total of $2.2 billion(1) was provided towards
this target.
BNZ
BNZ supports New Zealanders into warm, dry and resilient
homes. The focus to date has been on shared ownership
models that support construction and new home ownership.
One of these initiatives is First Home Partner, a shared
ownership initiative with Kāinga Ora aimed at helping people
who have a household income of under NZD $150,000 and a
minimum of 5% deposit. Partnering with Habitat for Humanity,
BNZ is helping homeowners who would otherwise lack access
to the necessary funds improve the resilience and liveability
of their homes. In 2023 the programme assisted 64 families,
with access to more than NZD $500,0000 of no interest lending
for home repairs improving the wellbeing of our communities.
Social, affordable and community housing
NAB is working closely with the Federal Government's major
housing financing body, Housing Australia, to help create
the right financing conditions to build scale in social and
affordable housing aligned with the Federal Government’s
ambition for 40,000 social and affordable homes by 2029.
This year NAB helped to finance social, affordable and
community housing transactions which included build to
rent, land lease and mixed tenure models. NAB is focused
on connecting and influencing key stakeholders through
networks in the affordable housing sector, and working
closely with community partners like Good Shepherd and the
Salvation Army.
Specialist Disability Accommodation (SDA)
Life with disability can make finding a liveable home harder. In
2023, NAB has financed the construction of some significant
specialist homes for people living with disability. This
included finance to the Australian Disability Accommodation
Projects(2). Working with Lighthouse Infrastructure and a
consortium of lenders, this is NAB’s largest commitment in
the SDA sector to date, and the first social loan for SDA
in Australia.
First Home Guarantee Scheme
NAB is helping people earning incomes under the national
median, access home ownership as part of the First Home
Guarantee (FHG) scheme which has established income and
other eligibility criteria. NAB’s affordable and specialist housing
target includes a subset of loans provided via the FHG, for
loans where applicants have a total taxable income under the
national median, and for properties with a price under the
national median. NAB is a founding bank in this scheme and in
2023 has financed loans in this subset housing, approximately
5,127 borrowers.
The growth of this scheme shows government, business and
community providers, all play a key role in making home
ownership more accessible. NAB is consulting with the Federal
Government on its new Help to Buy scheme, a shared equity
access program for low-income earners, announced in 2022.
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(1) Affordable and specialist housing includes affordable housing, specialist disability accommodation and sustainable housing. This includes loans made under the First
Home Guarantee and Family Home Guarantee, as part of the Home Guarantee Scheme for properties under the national median house price, and for borrowers with
taxable income below the national median household income. Progress is based on total lending facilities committed, where first draw down occurred during the target
period, or additional funding was provided during the target period for a pre-existing loan facility. This number does not reflect debt balance.
(2) Australian Disability Accommodation Projects Trust 2.
2023 Annual Report
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Colleagues
Colleague strategy
Colleagues and customers are the twin peaks of
NAB's strategy
NAB is delivering our Colleague Strategy with the goal of having
trusted professionals that are proud to be a part of NAB. Refer
to Figure 1 for further information.
NAB has:
•
Focused on developing leadership and capability for
leaders and colleagues. We have emphasised colleague
development and increased professionalism in our
workforce through formal banking accreditation (refer to
page 31).
• Delivered against our Inclusion and Diversity Framework
(refer to page 32).
•
Fostered a safe and healthy working environment where
colleagues can thrive (refer to page 36).
• Commenced our colleague-centric and future-focused
People and Culture technology transformation program
(refer to page 36).
• Achieved majority support from colleagues on the 2024
Enterprise Agreement (refer to page 36).
Workforce composition
NAB's workforce is made up of more than 38,000 colleagues
globally. About 93% of the workforce are in Australia and New
Zealand, while others work in Asia, London, New York and Paris.
NAB has observed lower levels of colleague attrition in 2023
as the broader economy experiences uncertain economic
conditions locally and globally.
Table 1: Workforce by contract type and gender
2023 (%)
Permanent full-time
Permanent part-time
Fixed term full-time
Fixed term part-time
Casual
External/temporary
employee/contractors
Female
Male
30.8
36.8
6.8
1.1
0.2
0.6
7.2
1.2
2.1
0.1
0.2
12.4
Source: Workforce distribution based on headcount as at
30 September 2023. Due to rounding, figures may not sum to 100%.
Chart 1: Workforce distribution by geographic region
0.9%
6.6%
14.3%
78.2%
Australia
New Zealand
Asia
UK, USA and Europe
Source: Workforce distribution figures based on headcount as at
30 September 2023. Total percentages may not equal 100 due
to rounding.
Chart 2: Group total colleague turnover
11.8%
11.8%
10.1%
10.1%
17.4%
17.4%
15.8%
15.8%
14.4%
14.4%
15.5%
15.5%
2018
2019
2020
2021
2022
2023
Figure 1: Colleague strategy
30
National Australia Bank
Colleagues (cont.)
Leadership and capability
NAB seeks to develop leaders and colleagues who are clear,
capable and motivated. Investing in skills and capability drives
engagement, resulting in improved customer experience and
overall performance.
NAB has three organisation-wide priorities to sustainably
improve leadership and capability. These are:
• Distinctive Leadership: NAB’s signature leadership
program, focused on bringing strong disciplines to leaders.
92% of leaders have completed the program. In 2023 the
Distinctive Leadership experience was made available to all
colleagues through digital learning modules, enabling the
extension of disciplines in support of colleague and
customer outcomes.
• People Leader Fundamentals: Launched in 2023, People
Leader Fundamentals is an enterprise-wide approach to
help people leaders navigate processes, systems and
policies at NAB. People Leader Fundamentals aims to
provide a structured, self-directed pathway for new
leaders, while also offering learning for experienced
leaders. People Leader Fundamentals sits alongside
Distinctive Leadership in enabling our people leaders to
excel in their roles.
• Career Qualified in Banking (CQiB): Reinforces the Group's
emphasis on colleague development, industry
professionalism and serving customers well, as it strives to
have Australia’s most qualified bankers. The key program
delivered by CQiB is the Professional Banking Fundamentals
qualification, delivered in partnership with Financial
Services Institute of Australasia (FINSIA). NAB has enrolled
over 20,000 colleagues since the program commenced in
2021, and has delivered more than 14,500 graduates at the
end of 2023.
To further support colleagues in building confidence and
competence in their roles, NAB offers technical learning
pathways, accreditations and core regulatory training to build
capabilities in areas such as green and sustainable finance,
cloud computing, engineering and product ownership. In 2023,
this included investments in NAB’s cloud skills training
program, Climate training for bankers, NAB Cloud Guild, and
deployment of the Technology Academy in Australia and
Vietnam to build a pipeline of digital skills.
NAB has invested in digital learning platforms to provide
colleagues the opportunity to access learning programs
relevant to their own development needs.
Talented professionals who shape the future
of banking.
Employer of Choice Awards
NAB was recognised for the second year running as #3
in the 2023 LinkedIn Top Companies to grow your career
in Australia. NAB also ranked #4 on GradAustralia’s Top
100 Graduate Employers and #1 in the Banking & Finance
industry. Other recognition included:
• #6 in the 2023 Top 100 Most Popular Graduate
Employers List as determined by GradConnection/AFR
(up from #9 the prior year)
• #25 on the Australia Associate of Graduate
Employers top 75 list. The highest of the Big 4 banks
and up from #50 the prior year.
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2023 Annual Report
31
Colleagues (cont.)
Engagement
Listening and acting on colleague feedback is critical
to engagement. One way in which leaders engage in
regular and careful colleague listening is NAB’s ‘Heartbeat’
engagement survey.
Heartbeat provides an opportunity to gain a deeper
understanding of NAB's colleagues, and what drives
engagement. Information from the Heartbeat survey helps
leaders address the needs of their teams and informs NAB’s
Executive Leadership Team (ELT) in identifying consistent
feedback and areas of improvement across the bank.
Against a backdrop of declining engagement across
corporates globally, NAB’s average engagement score of 77(1)
for 2023 met the top quartile global benchmark of 77 and has
improved from 2022. NAB's engagement score was 78 as at the
July 2023 survey.
Key strengths identified by colleagues include their people
leader, their understanding of how their work contributes to
NAB’s strategy and being treated with respect.
Colleagues identified opportunities for improvement in the
need for NAB to become a simpler place to work and removing
barriers that slow down work. Information on how NAB is
making things easy for customers and colleagues is on page
13 in the Strategy section of this report.
Inclusion and diversity
Inclusion and diversity (I&D) provides better outcomes for
customers, colleagues and the community. Ensuring that
colleagues feel appreciated and empowered to contribute
helps improve performance, innovation and risk management.
The Board has endorsed a three year I&D Strategy Framework
for 2022-2024.
The three pillars of the I&D Strategy Framework are:
1.
2.
Inclusive leadership: Leaders are visible in their work
towards inclusion and actively build diversity in teams. They
role model How We Work in their everyday actions and
ensure that systems are inclusive and accessible to all.
Inclusive workplace: A culture that actively promotes
and leverages team diversity, flexibility and wellbeing. An
environment where all colleagues feel they can contribute
to their full potential.
3. Customer inclusion: Colleagues who take pride in
understanding the needs of NAB's customers, ensuring that
they can access the information, services and products
they need with ease.
In line with the framework, in 2023 NAB has:
• Continued to embed the I&D governance structure,
which includes the operation of NAB’s I&D Council and
restructuring of NAB’s Employee Resource Groups (ERGs) to
include stronger executive sponsorship.
•
Incorporated key performance indicators for I&D, which are
linked to remuneration, into the ELT’s performance plans.
• Developed and delivered on divisional I&D plans owned by
each Group Executive, which support tailored actions and
emphasise the leader-led approach to inclusion.
•
Launched the First Nations Employee Resource Group.
is assessed and reported on at least annually. The I&D
Policy is available on NAB's website at nab.com.au/about-us/
corporate-governance. The ELT has direct accountability for
the execution of the framework. All leaders at NAB have I&D
goals included in their annual performance plan. The Board
and the ELT's ambition is for a workforce that is reflective of
the broader community and a reputation that attracts and
retains the best talent.
Gender equality
NAB has set measurable objectives for gender equality, with a
target to achieve 40-60% female representation at every level
of the business, and to reduce the gender pay gap to below
10%, both by 2025. Our measurable objectives are detailed on
page 35.
Representation
There has been solid progress towards gender representation
targets in 2023, with increases in representation of women
on the Board and across senior salary groups where
representation has historically been lower. The Board has
achieved gender diversity in the composition of its non-
executive directors in 2023, with 55% being women.
To continue to improve representation of women, NAB
invests in initiatives designed to accelerate a diverse
pipeline of women towards more senior roles. This
includes the 1500 degrees program in our Business and
Private Banking business, which provides Group 3 & 4
women with targeted learning, networking, sponsorship, and
development opportunities.
Reducing the gender pay gap
NAB's 2023 gender pay gap for base pay is 15.8%(2) decreasing
from 16.9% in 2022. This was primarily driven by an increase in
representation of women in middle to senior leadership.
Driving greater representation of women in leadership roles is
one of the most sustainable ways to continue reducing the
gender pay gap and a key priority for NAB.
Equal pay or pay equity differs from gender pay gap, and
broadly means pay decisions are not influenced by factors
such as gender, age, ethnicity, religion or sexual orientation.
We take specific steps to ensure that all colleagues are
paid equally for doing the same role, including undertaking
pay equity reviews as part of our annual performance and
remuneration process. This analysis compares pay for similar
roles and seeks to account for legitimate factors driving
differences in pay (e.g. seniority, expertise, experience, and
performance). Following this recent review in 2023, NAB
made positive adjustments to the end-of-year remuneration
decisions of more than 400 colleagues.
Additional steps to ensure colleagues are paid equally for
doing the same job, include:
• Clear guidance to People Leaders who make pay decisions
that determinations must reflect the individual’s role and
contribution to NAB.
• Providing People Leaders with pay equity analysis for
consideration in annual pay reviews and subjecting
our annual performance and pay reviews to a robust
challenge process.
Leader-led, colleague-enabled approach
• Communicating with colleagues and increasing the
NAB's I&D Policy includes a requirement for the Board
to set measurable objectives for achieving inclusion and
diversity which, together with progress on the framework,
transparency of pay outcomes.
• Continuing to simplify our remuneration structures
where appropriate.
(1) 2023 Heartbeat Surveys conducted by Glint, score based on an average of the four surveys conducted in November 2022, February 2023, May 2023 and July 2023.
Includes Australia and New Zealand colleagues, excludes external contractors, consultants and temporary colleagues.
(2) Based on the percentage of women in each salary level, calculated using population of permanent full-time and part-time colleagues.
32
National Australia Bank
Colleagues (cont.)
Cultural inclusion
Accessibility
NAB encourages colleagues to use cultural and religious leave,
providing up to three working days of paid leave each year to
celebrate important cultural or religious events and traditions.
NAB was Platinum sponsor of the Asian Leadership Project’s
national conference and participates in its National Group
Mentoring program.
NAB’s Cultural Inclusion Employee Resource Group (ERG)
aspires to promote an inclusive workplace where cultural
diversity is celebrated, to increase diverse representation
in senior leadership roles, and to harness the power of
cultural inclusion. The ERG provides a forum for colleagues
to celebrate many cultural dates of significance and works
passionately to help culturally diverse colleagues to advance
their careers at NAB.
Indigenous Australian inclusion
Ensuring that all colleagues understand First Nations culture
is critical to support inclusion in the workplace and for our
customers. This year NAB’s Indigenous cultural awareness
training was refreshed and made mandatory for all Australian
colleagues. This was supplemented by a specific cultural
capability program for all Executives.
NAB supports employment pathways at all levels for First
Nations Australians. In the past 12 months entry-level positions
through the Indigenous intern and trainee programs (13 and 25
positions respectively) have been provided.
In 2023, NAB’s First Nations ERG was launched. Having a
shared understanding forms a strong basis which is central
to true reconciliation and progress. The ERG seeks to create
a culturally safe environment within NAB where First Nations
colleagues have a clear sense of community.
NAB measures the inclusion experience for colleagues
who identify as Aboriginal and/or Torres Strait Islander
annually through the Heartbeat survey. In 2023, the
inclusion index score for this cohort was 80, which is 3
points lower than non-Aboriginal and Torres Strait Islander
colleagues. NAB will work to reduce the gap in 2024,
through initiatives outlined in NAB’s Reconciliation Action
Plan available at nab.com.au/content/dam/nab/documents/
reports/corporate/reconciliation-action-plan-2022-2023.pdf.
LGBTQIA+ inclusion
NAB was awarded Platinum Status in the 2023 Australian
Workplace Equality Index (AWEI). This is the highest
recognition, acknowledging NAB’s high level of performance
over a sustained time.
The NAB Pride ERG aims to be the voice of LGBTQIA+ colleagues
and customers, by raising awareness and advocating for a
safe, inclusive workplace and experience.
In 2023, NAB introduced gender affirmation leave, of up to 12
months, consisting of 4 weeks paid leave and the remainder
unpaid. Colleagues who take steps to affirm their gender have
the entitlement to build a gender affirmation plan alongside
their people leader, and a support person, to help ensure a
positive experience in affirming gender at work.
NAB supports the LGBTQIA+ community through partnerships
with Out Leadership, the Pride Cup, and Principal Partnership
of the Midsumma Festival in Melbourne for the eleventh
consecutive year.
NAB released the Group Accessibility Action Plan 2023-2024,
which will deliver on three key goals:
• Being an employer of choice for people with disability.
• Helping communities to prosper by supporting disability
organisations to solve emerging issues.
• Using data and insights from customers to listen,
understand and implement improved accessibility into
their experience.
In 2023, NAB was ranked in the top three organisations on the
Australian Network on Disability Access and Inclusion Index.
Key partnerships informing NAB’s approach include:
• Valuable 500, a global movement putting disability inclusion
on the business leadership agenda. Through involvement in
this global network NAB is building capability and striving for
best practice in disability inclusion.
• Australian Network on Disability, participating in programs
and initiatives including the Stepping Into internship
program and the Positive Action Towards Career
Engagement (PACE) Mentoring Program.
The NABility ERG, a voluntary group of colleagues with disability,
carers of people with disability and allies, has used internal
and external story-telling to celebrate the role and valuable
contributions that colleagues with disability have at NAB. They
have also delivered internal events to encourage disability
pride and reduce ableism.
Supporting colleagues who are carers
This year NAB has strengthened our parental leave offering by:
• Providing equal leave to both parents by removing the
distinction between primary and secondary carers.
•
Increasing the number of weeks paid parental leave to 16
weeks upon the birth of a child, as well as for adoption,
foster and kinship arrangements for children under 16 years
of age, with additional flexibility as to when the leave can
be taken. This builds on changes made last financial year
that removed the requirement to have at least 12 months
service to qualify for paid parental leave.
• Updating our pregnancy loss leave provisions to provide
two weeks’ paid leave (or 16 weeks’ paid leave if more than
20 weeks’ gestation).
• Enhancing the superannuation contributions for full and
part time colleagues on parental leave, increasing these
to a period of two years from date of birth or placement (up
from 52 weeks).
The return-to-work rate(1) across all genders and all Australia
colleagues after parental leave was 93.6%, an increase on 2022
(92.5%). NAB monitors this rate and supports colleagues to
return to work.
Anti-harassment and discrimination
NAB has zero-tolerance for sexual harassment and works
to fulfil our duty to prevent sexual harassment and
discrimination. In response to the Respect@Work legislative
changes, a detailed gap analysis has been completed using
the Australian Human Rights Commission’s Good Practice
Indicators Framework to ensure NAB has clear outcomes and
measures on leadership, culture, training, risk management,
support, reporting, monitoring and evaluation.
A Respect@NAB training module has been added to NABs
People Leader Fundamentals program, which is designed to
(1) Percentage of Employees due to return from paid parental leave of >90 days between October 1 2022 - 30 September 2023 who have returned and remained working for
a period of at least 30 days.
2023 Annual Report
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educate People Leaders on NAB’s legislative obligations and to
foster an environment that reduces the likelihood of bullying,
harassment and other inappropriate conduct.
Additional actions to strengthen leadership responsibility,
bystander interaction, training and risk management are
underway. A psychosocial risk working group meets quarterly
to identify trends and issues and proactively address risk
indicators of sexual harassment and other forms of unlawful
discrimination, harassment and bullying.
NAB takes a complainant-sensitive approach to complaint
handling and encourages speaking up and to address
any concerns raised regarding unlawful discrimination and
bullying, including sexual harassment. There has been more
frequent and targeted communication, enhanced conduct
and risk awareness training for all colleagues, and support
for People Leaders managing concerns about harassment and
discrimination. NAB’s discrimination and harassment guidelines
can be viewed on nab.com.au.
Diversity in supply chain
Including diverse suppliers (businesses owned by women, First
Nations people, people with disability, and social enterprises)
into NAB's supply chain helps increase their exposure to
corporate sourcing, while creating employment and training
opportunities, sustainable growth and social and financial
inclusion. In 2023, NAB’s spend with diverse suppliers increased
to $7.5 million(1) up from $4.2 million in 2022. Of this, $6.0 million
was to Indigenous supplier spend, exceeding NAB’s target to
spend $5 million in 2023.
(1)
In 2023, NAB increased its resourcing and improved processes for recording and reporting on supplier diversity, allowing greater opportunity to identify pathways for
spending with diverse suppliers including Indigenous suppliers. NAB’s spend with diverse suppliers increased to $7.5 million up from $4.2 million in 2022. Of this, $6m was
to Indigenous suppliers, against NAB’s target to spend $5m with Indigenous suppliers in 2023. Diverse spend has 2 pathways to capture spend as follows: 1) Diverse
supplier engaged directly by NAB (Tier-1 or Direct Suppliers); 2) Diverse supplier engaged through a NAB supplier as a subcontractor (Tier-2 or Directed Suppliers).
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Colleagues (cont.)
Table 2: Progress Against NAB's 2021-2025 measurable objectives
Measurable objective
2021
2022
2023
2025 target
1. Diverse leadership teams and talent pipelines
40-60% gender representation at every level of the business(1)
40-60% gender representation on NAB Group Board (non-executive directors)
40-60% gender representation on NAB subsidiary boards
Representation of women
NAB Board (non-executive directors)
NAB Group subsidiary boards
Executive Management (Salary level 7)
Executive Management (Salary level 6)
Senior Management (Salary level 5)
Management (Salary level 4)
Non-management (Salary level 3)
Non-management (Salary level 2)
Non-management (Salary level 1)
Total organisation
38%
49%
33%
35%
36%
38%
45%
56%
71%
50%
38%
49%
31%
36%
36%
39%
46%
57%
70%
50%
55%
53%
33%
37%
38%
39%
46%
56%
68%
50%
40-60%
40-60%
40-60%
40-60%
40-60%
40-60%
40-60%
40-60%
40-60%
40-60%
2. Fair remuneration – seek to reward people fairly and support the objective of <10% gender pay gap by 2025
Gender pay gap(2)
3. Inclusive workplace culture(3)(4)
Women (Difference vs men)(5)
People with disability (Difference vs people
without disability)(6)
Ethnic minority (Difference vs non-ethnic
minority)(7)
LGBTQIA+ (Difference vs non-LGBTQIA+)(8)
Carers (Difference vs non-carers)(9)
16.6%
16.9%
15.8%
<10%
-2 (81 vs 83)
-4 (79 vs 83)
-1 (81 vs 82)
-5 (78 vs 83)
-3 (79 vs 82)
-6 (77 vs 83)
-1 (82 vs 83)
0 (83 vs 83)
0 (83 vs 83)
-3 (80 vs 83)
-1 (83 vs 84)
-2 (81 vs 83)
-1 (82 vs 83)
-2 (80 vs 82)
-2 (81 vs 83)
0
0
0
0
0
(1) Based on the percentage of women in each salary level, calculated using population of permanent full-time and part-time colleagues.
(2) The pay gap analysis indicates NAB’s gender pay gap when comparing the base salary of all females to males within the Australian-based workforce of NAB, for the
reporting period 1st April 2022 to 31 March 2023. The ratio is calculated by dividing the female average salary by the male average salary per employment level. It does
not separately measure the gender pay gap in equivalent roles. Analysis includes permanent, fixed term, and casual colleagues and excludes contractors. Gender pay
gaps for 2021 and 2022 reflect Workplace Gender Equality Agency (WGEA) published figures. Note at time of reporting WGEA figures were not published for 2023, these
figures represent NAB calculated gender pay gaps following the WGEA methodology.
(3) The inclusive workforce culture scores are based off responses to NAB's Heartbeat survey conducted in July 2023 (2023 score), August 2022 (2022 score) and July
2021 (2021 score). The methodology was revised in 2022 to measure the differences on an inclusion score, based on a combined response to three questions: 1. 'I feel
comfortable being myself at work'. 2. 'I am treated with respect and dignity' and 3. 'Regardless of background, everyone at our company has an equal opportunity to
succeed'. The table represents the scores for specific historically under-represented groups, with comparisons to the related majority group within the workforce.
(4) ubank did not participate in the demographic section of Heartbeat survey in 2023, therefore no ubank data is included in the inclusion scores that are reported for
2023. ubank data is included in 2022 and 2021 inclusion scores.
(5) Inclusion score is calculated using responses to questions in Heartbeat survey, with gender of respondents based on how this is recorded in SAP.
(6) Colleagues who selected that they identify as a person with disability in the Heartbeat survey.
(7) The methodology used in defining ethnic minority was altered this year, to take into account NAB’s growth in international colleagues. Ethnic minority and non-ethnic
minority calculations only include colleagues from Australia, NZ, UK and US. The ethnic minority group is comprised of individuals whose ethnicity is considered to be
an ethnic minority in those included regions. Colleagues based in other regions have not been included in the calculation this year, as identification of ethnic minority
would be different in those regions
(8) Categories were expanded in 2022 to include asexual, homosexual, pansexual and non-binary or other genders. Other categories include lesbian, gay, bisexual,
transgender, agender, bigender, another gender, intersex and different identity.
(9) Colleagues who selected they spend time providing unpaid care, help, or assistance to family members or others with a disability (including children, adults or
older adults).
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Colleagues (cont.)
Health, safety and wellbeing
NAB recognises the importance of fostering a safe and
healthy working environment where colleagues can thrive.
Hybrid and flexible working
As a relationship-led bank, NAB has continued to support
colleagues to work in a hybrid manner where their role
permits, balancing the needs of our customers, colleagues
and operations. As part of our hybrid working model, the
majority of colleagues (excluding those in branches) have
the option to work flexibly, with an expectation that they
work from a NAB location (such as a NAB office) a minimum
of two days per week. NAB’s hybrid approach includes tools
and resources to support hybrid practices, in-person events,
greater opportunities for face-to-face collaboration and
social connection. Ongoing review of feedback to address
barriers to attending the office is in place to continuously
improve the experience for colleagues.
While we scaled back our COVID-19 response in line with
changing Government requirements, colleagues who are
unwell are still required to stay at home to prevent
transmission of illness. There has been a higher than usual
uptake in our annual flu vaccination program this year and
absenteeism (measured as unscheduled absence day per FTE)
has reduced from 9.2 days per FTE in 2022 to 7.8 in 2023(1).
We support flexible working as it has a wide range of
inclusion benefits and allows NAB to attract and retain the
best talent, including for colleagues with accessibility needs,
or those managing multiple responsibilities outside work.
Colleagues can adopt other flexible working arrangements
including variable start/finish times, part-time hours and job-
sharing opportunities.
Wellbeing program
The Group has implemented a refreshed wellbeing strategic
framework in 2023 under the 'Right Culture' pillar of
our Colleague Strategy. The three focus areas of the
framework include:
• Respond to health concerns.
• Prevent harm.
• Promote thriving.
The focus has shifted towards initiatives that promote
thriving, whilst continuing to support colleagues with their
recovery and safe return to work following work or
non-work-related injury or illness. This service remains
a priority, delivered through our team of allied health
professionals, which also includes assisting colleagues who
have experienced domestic and family violence, ensuring that
they have access to leave and specialist support services.
Counselling services remain available through our Employee
Assistance Program and are available to all colleagues,
their families and NAB customers. Customer utilisation of
this service has increased during the year, and we expect
to see this continue due to challenges in the external
environment including cost of living pressures. NAB also
has a robust program in place to support colleagues and
customers in managing the impacts of natural disasters
through counselling, leave options and emergency grants,
where the need arises.
The introduction of an extra five days of leave, You Leave in
2023 has led to a greater uptake of annual and long service
leave this year.
The management of psychosocial risk continued to be an area
of focus, and we have strengthened our approach through:
(1)
Includes Australia-based colleagues only.
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National Australia Bank
• Enhanced data analytics and insights to assist with
identifying psychosocial hazards, assessing risks and
measuring the effectiveness of controls.
• Building leader capability through communications and
campaigns, People Leader Fundamentals online program,
webinars, and new tools to help manage workload and
wellbeing for teams.
• Establishment of a Psychosocial Risk Working Group to
share insights and drive prevention initiatives.
• Promotion of wellbeing resources available to colleagues
under the banners of physical, mental, social and
financial wellbeing.
NAB’s Heartbeat surveys have seen incremental
improvements in the wellbeing score during the year from
74 in February 2023 to 77 as at the July 2023 survey and we
will continue to build on this through delivery of our wellbeing
strategic framework.
Investing in People and Culture
information technology
NAB is investing in world-class digital technology to make it
simpler and easier for colleagues. In 2023 NAB commenced the
roll-out of a new global platform, with deployments to China,
Singapore, Japan and Hong Kong. More locations are planned
in 2024, which will include transition to a fully managed payroll
service for NAB’s larger regions. Implementation is expected
to be completed in 2025, enabling the automation of core
Human Resource processes and controls and more efficient
People & Culture service delivery.
Enterprise Agreement
The current Enterprise Agreement 2016 sets out the
conditions of employment for NAB colleagues who work
in Australia.
A new Enterprise Agreement 2024 was supported by a majority
of NAB colleagues. The new Enterprise Agreement 2024 was
approved by the Fair Work Commission in September 2023
and will commence in February 2024. The new Enterprise
Agreement 2024 will only cover colleagues in Groups 1-6 who
are based in and working in Australia. The new Enterprise
Agreement aims to reward colleagues fairly, support them in
important times of their lives and includes simplifications such
as grandfathering of Rostered Days Off for existing colleagues
and the removal of annual leave loading.
There are no significant changes to industrial arrangements in
other jurisdictions.
Payroll Remediation
The Payroll Review was established in January 2020 to
examine NAB’s compliance with obligations to colleagues
relating to remuneration and other entitlements under
applicable law and NAB agreements. Within Australia, NAB has
finalised the investigation and remediation of the largest
and most complex issues. NAB has made total payments of
$154.7 million, including interest, to colleagues and has:
• Made significant investments in the ongoing operations
team, including strengthening our risk environment,
and associated controls and obligations relating to
remuneration entitlements.
• Continued to contact and pay former colleagues.
Climate change and environment
NAB's climate strategy is aligned to our strategic ambition - to serve customers well and help our
communities prosper. We acknowledge that climate change is a significant risk to the planet and a
major challenge for society to address. Beyond this risk, there is an immense economic opportunity
as the world transitions to a low-carbon future. We are working with customers as they decarbonise,
adapt and build resilience, while pursuing new climate opportunities for a prosperous future.
Climate strategy
NAB is seeking to act as a catalyst for climate action through the financing we provide and the insights we share with customers.
NAB is supporting customers to reduce their emissions and has set targets to align with pathways to net zero by 2050,
consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100. This approach is underpinned by core
beliefs including:
• Climate transition can create growth for the economy.
• Management of climate transition is core to our business, not an adjacency.
• Our approach is relationship-led, supported by strong enabling capabilities.
•
Sector decarbonisation targets should be science-based.
This section of the report provides a summary of activities and performance in 2023, guided by the Task Force on Climate-related
Financial Disclosures (TCFD) recommendations, with detailed TCFD aligned disclosures and an update on our Net Zero Banking
Alliance (NZBA) interim 2030 sector decarbonisation targets (decarbonisation targets), available in NAB's 2023 Climate Report,
available at nab.com.au/annualreports.
NAB's climate strategy is aligned to the Group’s strategic ambition to serve customers well and help communities prosper. The
appointment of our first Chief Climate Officer, in addition to an increased focus on banker climate training and colleagues’
climate capabilities, helps support NAB’s whole-of-bank approach to its climate strategy and to help achieve emissions
reduction consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100. Business Unit climate change
strategies are in place across Business and Private Banking, Personal Banking, Corporate and Institutional Banking and BNZ.
Our climate strategy also captures our operational emissions ambition, including emissions from our international offices where
applicable, in addition to the capability of our colleagues in supporting our customers through the transition. Our focus remains
on maximising economic benefits for customers and shareholders, to support customers as they decarbonise, adapt and build
resilience, while pursuing new climate opportunities and creating prosperity.
NAB's strategic climate priorities
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Given the country and economy-specific climate-related risks and opportunities for the BNZ, BNZ has its own climate
strategy, is a member of the NZBA and is setting its own sector decarbonisation targets to meet its NZBA commitment.
Refer to BNZ’s climate reporting at www.bnz.co.nz/about-us/sustainability for further details.
2023 Annual Report
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Climate change and environment (cont.)
Governance
The Board retains oversight of ESG-related matters including
climate-related risks and opportunities. ESG considerations
are integrated into business strategy, operations and
risk management.
The Board is supported by the Board Risk & Compliance
Committee (BRCC) which has accountability for oversight of
the Group’s risk profile and risk management. This includes
ESG risk, within the context of Board determined risk appetite,
although ultimate responsibility for risk oversight, risk appetite
and risk management rests with the Board.
The Group’s approach to sustainability governance is
described in Sustainability in the Group’s strategy on page 22.
The Group’s overall approach to governance is outlined
in the Corporate Governance Statement section on page
61. Specific information on ESG Risk-related governance is
provided in the ESG Risk Management section on page 61.
In 2023, key climate-related matters presented to the
Board included:
• The 2022 Climate Report and draft climate disclosures
for 2023.
• Decarbonisation targets to meet NAB's NZBA commitment
and engagement plan to May 2024 in relation to further
target setting proposed.
• Risk appetite and related performance.
• Updates on the Group’s environmental performance and
related regulatory reporting.
Risk management
ESG risks, including climate-related risks, are identified,
measured, monitored, reported and overseen in accordance
with the Group’s Risk Management Framework (RMF)(as
described in the Group’s Risk Management Strategy). Refer to
the ESG Risk Management section (pages to 53 to 55) of this
report for further information on ESG risk management and
our ESG risk-related capability initiatives, including those for
climate risk. Other climate risk focused initiatives undertaken
in 2023 included:
•
Incorporating key learnings from participating in APRA’s
Climate Vulnerability Assessment into a proof-of-concept
climate risk tool called 'HomeID' which provides access
to a data asset for the home lending portfolio so NAB
and its customers can make more effective decisions in
response to the potential physical risk impacts arising
from climate change. Further detail is provided in our 2023
Climate Report.
• Enhancing guidance for Corporate & Institutional Banking
colleagues on how to incorporate climate risk information
into credit risk assessment and credit submission
documentation. Additionally, a program of work has
been established to more deeply integrate climate risk
considerations into credit risk management processes.
•
Integrating sector decarbonisation targets into NAB’s
enterprise risk management tool - Governance Risk And
Compliance Engine (GRACE).
Board were briefed on, and approved, the second tranche
of sector decarbonisation targets (Aluminium, Iron & Steel
and Aviation).
NAB's approach to climate change, including climate-related
risk management, is detailed in its 2023 Climate Report at
nab.com.au/annualreports.
2023 Climate Report
The Group has publicly reported on climate-related
performance since 2003. Over the past two decades, the
Group has been maturing its management of climate-
related risks and opportunities.
The Group has been certified carbon neutral for its
Australian operations since 2010(1), aligned its climate-
related reporting to the recommendations of the
TCFD since October 2017 and joined the NZBA in
December 2021.
Recognising the increasing level of demand for detailed
disclosures on climate-related matters, this year NAB
has prepared its second standalone Climate Report. The
Climate Report details NAB's approach to climate change
covering: governance, strategy, risk management and
metrics and targets. The Climate Report also includes
information about the methodologies we use.
NAB's 2023 Climate Report at nab.com.au/annualreports.
Metrics and targets
NAB has developed metrics and targets to track progress
against its climate strategy, and to measure and manage
its climate-related risks and opportunities. We have been
focused on operational GHG emissions reductions since 2003.
Now, as a member of the NZBA, we are also setting targets
for financed emissions, and monitoring and reporting our
progress, as part of this commitment. In 2023, NAB set three
sector decarbonisation targets (aluminium, iron and steel
and aviation, a sub-sector of transport). This takes the
total number of sector decarbonisation targets set to date
to seven. Sector decarbonisation targets were set in 2022
for power generation, oil and gas, thermal coal mining and
cement. In setting these sector decarbonisation targets, NAB
has been informed by the UNEP FI Guidelines for Target Setting
for Banks. NAB plans to set further sector decarbonisation
targets in May 2024. Detailed information about NAB‘s sector
decarbonisation targets is included in NAB’s 2023 Climate
Report available at nab.com.au/annualreports.
BNZ has separately joined the NZBA, and in May 2023
published its first set of sector decarbonisation targets in
line with the time frames set out by NZBA. BNZ's initial sector
decarbonisation targets were set for the coal mining, dairy,
power generation, and oil and gas sectors. BNZ selected
these sectors because of their emissions intensity, the
relative availability of emissions data, and BNZ's lending
exposure to these sectors. During 2024, BNZ plans to publish
its sector decarbonisation targets for: sheep and beef;
aluminium; cement; commercial and residential real estate;
iron and steel; and transport. Further details on BNZ's
sector decarbonisation targets, target setting approach and
key assumptions are available in BNZ's Net Zero Banking
Alliance targets disclosure, available at: bnz.co.nz/about-us/
sustainability/environment-and-climate.
The following section provides a high-level overview of
relevant operational environmental performance and targets,
(1) Carbon neutral in operations refers to the process the Group follows to first avoid and reduce greenhouse gas emissions associated with its operational Scope 1, 2 and
3 emissions (excluding financed emissions) and retiring carbon offsets for residual emissions. NAB's Australian operations were first certified carbon neutral on 1 July
2010 under the National Carbon Offset Standard, now the Climate Active Carbon Neutral Standard for Organisations, NAB has a forward purchasing approach and forward
purchased and retired offsets for the environmental reporting year (1 July 2010 to 30 June 2011) to be carbon neutral for 2011. BNZ has been a Toitū net carbonzero
certified organisation since 2022. JBWere NZ has been a Toitū net carbonzero certified organisation since 2021.
38
National Australia Bank
Climate change and environment (cont.)
as well as regulatory reporting. NAB's detailed metrics and
targets relating to operational and financed emissions
are disclosed in its 2023 Climate Report, available at
nab.com.au/annualreports.
0.04 tCO2-e per metre squared of property space occupied by
the Group's London Branch. Further London Branch and Group
energy and GHG emissions data is provided in the Group's 2023
Climate Report (refer to page 60).
Operational GHG emissions and relevant
environmental regulatory reporting
During the 2023 environmental reporting year, the Group’s total
market-based GHG emissions (Scope 1, 2 and 3(1)) were 64,566
tCO2-e (2022: 60,829(2) tCO2-e), after accounting for use of
certified renewable energy. The Group retired 64,566(3) offsets
in 2023. These offsets are a mix of Australian Carbon Credit
Units and Verified Carbon Units. They are generated from
projects which include Indigenous-led savannah burning and
renewable energy projects. NAB has purchased offsets only
from domestic sources since 2020. Prior to 2020, offsets were
purchased domestically and internationally and NAB retains a
bank of these offset purchases. The Group is carbon neutral
in operations. Its Australian operations are certified carbon
neutral by Climate Active and have been since 2010. In New
Zealand, BNZ has been a Toitū(4) net carbonzero certified
organisation since 2022. JBWere NZ has been a Toitū net
carbonzero certified organisation since 2021.
National Greenhouse and Energy Reporting Act disclosures
The Group’s operations are subject to the National
Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act).
This is part of Australia’s legislative response to climate
change. The NGER Act requires the Group to report on the
period from 1 July to 30 June (the environmental reporting
year), therefore, all of the Group's energy and GHG emissions
reporting is aligned to this reporting period.
The Group’s Australian vehicle fleet and building-related
net energy use reported under the NGER Act for the 2023
environmental reporting year was 327,609 gigajoules (GJ)
(2022: 334,194 GJ), which is approximately 83% of the Group’s
measured total net energy use. The associated total GHG
emissions from fuel combustion (Scope 1) and from electricity
use (Scope 2) were 60,354 tCO2-e (2022: 71,035 tCO2-e).
Streamlined Energy and Carbon Reporting
The Group is voluntarily reporting data required for the
Streamlined Energy and Carbon Reporting (SECR) requirements
which are implemented through the Companies (Directors’
Report) and Limited Liability Partnerships (Energy and Carbon
Report) Regulations 2018 (United Kingdom) in the Group's 2023
Climate Report. The Group's United Kingdom-based (London
Branch) energy use(5)reported, and aligned to the SECR for
the 2023 environmental reporting year was 543,941 KWh (2022:
506,076 KWh). The associated total gross GHG emissions from
fuel combustion (Scope 1) and from electricity use(6)(Scope 2)
were 111 tCO2-e (2022: 97 tCO2-e). This equates to 218 KWh and
Operational energy efficiency
The Group continues to implement an energy efficiency
program, including energy efficiency opportunity assessments
and sustainable building design. This helps to produce GHG
emissions reductions and contributes to the delivery of the
Group's climate change strategy and targets. From 1 July
2006 to 30 June 2023, the Group has identified and recorded
a total of 1,327 energy efficiency and renewable energy
opportunities, primarily in Australia. A key focus of our program
has been improving the energy efficiency and environmental
performance of the major buildings we occupy. This has
included moving into: (i) three new major commercial buildings
in Australia in 2022; and (ii) a newly refurbished and more
energy efficient office building for our branch in the US in 2023.
As a result of our focus on major buildings and the purchase of
renewable energy over the past few years, fewer other energy
saving initiatives have been identified and implemented. A
focus on lighting and HVAC upgrades across our Australian
building portfolio including branches and business banking
centres has continued and we plan to reassess outstanding
energy efficiency initiatives and refresh our pipeline of energy
efficiency opportunities in 2024.
In 2014, the Group’s United Kingdom-based operations became
subject to the Energy Savings Opportunities Scheme (ESOS),
introduced by the United Kingdom ESOS Regulations 2014.
The ESOS requires mandatory energy assessments (audits) of
organisation buildings and transport to be conducted every
four years. The Group's London Branch has completed its ESOS
energy efficiency assessment in 2023 as part of preparation
for its ESOS submission. However, due to having moved our
London office into a new energy efficient commercial building
in 2019, only four small energy efficiency opportunities were
identified. The Group fulfilled its most recent ESOS obligation in
December 2019 and will resubmit as required by 5 June 2024.
Additional detail on the Group’s environmental and climate-
related performance is provided in the 2023 Sustainability Data
Pack available at nab.com.au/annualreports and in the Group's
2023 Climate Report, which contains information on the
methodologies used by the Group to calculate GHG emissions.
Further detail is also available on the Group website(7).
(1) Scope 1 GHG emissions are direct emissions from sources that are owned or controlled by an organisation including on-site fossil fuel combustion and vehicle fleet
fuel consumption. Scope 2 emissions are indirect emissions from purchased electricity. Scope 3 emissions relate to all other indirect emissions that occur outside the
boundary of the organisation as a result of the activities of the organisation. However, the Group’s Scope 3 emissions reported here are operationally-related and do
not include Scope 3 emissions associated with the Group’s financing activities. The Group commenced reporting on Scope 3 attributable financed emissions in 2021.
Attributable financed emissions are not included in the Group’s carbon neutral position.
(2) In 2023, the Group has selected a market-based approach as its primary electricity accounting method, having previously used a location-based methodology. The
Group has retired offsets to achieve its carbon neutrality based on its market-based position. The Group has also changed its methodology for calculating market-
based emissions to more closely align with the Department of Climate Change, Energy, the Environment and Water (DCCEEW) in its Australian National Greenhouse
Accounts Factors August 2023 manual. The Group has restated its 2022 market based emissions number from 77,236 to 60,829 tCO2-e.
(3) BNZ’s 2022 emissions were restated to reflect minor changes. BNZ's Scope 2 emissions increased by 147 tCO2-e and Scope 3 emissions increased by 41 tCO2-e to
account for a change in the electricity emissions factor due to MfE’s August 2022 release of ‘Measuring emissions: A guide for organisations: 2022 summary of emission
factors’ and improved accuracy of water data in 2023 following release of 2022 accruals. The net change in total BNZ GHG emissions after accounting for renewable
energy is 76 tCO2-e. The total offsets retired for 2023 include an additional 76 offsets to account for restatement of the 2022 BNZ emissions figure.
(4) Toitū Envirocare is the wholly-owned subsidiary of Manaaki Whenua – Landcare Research, a New Zealand Government-owned Crown Research Institute. They provide
Toitū carbonreduce, Toitū net carbonzero and Toitū enviromark programmes and certifications for businesses in New Zealand and many countries globally.
(5) The Group's energy use and GHG emissions reported voluntarily in alignment with SECR requirements are associated with building-related gas and electricity use only.
The Group does not have a vehicle fleet associated with its United Kingdom operations.
(6) 100% of the Group's United Kingdom-based (London Branch) electricity is renewable electricity.
(7) Refer to 'How we calculate our carbon emissions' on nab.com.au/about-us/social-impact/environment/climate-change.
2023 Annual Report
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Climate change and environment (cont.)
Biodiversity and natural capital
Biodiversity and natural capital play a critical role in
underpinning wellbeing and economic activity. NAB has
further progressed its understanding and management of
nature-related risks and opportunities building on work that
started in 2011 with NAB contributing to the development
of, and becoming an inaugural signatory to, the Natural
Capital Declaration.
Supporting customers with nature-related risks
and opportunities
NAB is supporting customers as they respond to the
opportunities and risks which result from their impacts and
dependencies on nature.
Progressing towards the recommendations of
the Taskforce on Nature-related Financial
Disclosures (TNFD)
NAB recognises the benefits of standardised disclosure
guidance in helping to identify, manage and report against
nature- related risks and opportunities and welcomes the
release of TNFD recommendations in September 2023.
NAB's participation in the TNFD forum has informed the
development of its approach. Key activities in 2023 included:
• Pilot testing of TNFD LEAP(1) process using freshwater as a
case study and drawing on the beta version of the TNFD
framework. A summary of the lessons learned appears
below. The pilot was managed by UNEP FI, and the full
findings are available at www.unep.org.
Providing products to support customers
• NAB Agri Green Loan. In November 2022, NAB launched its
Agri Green Loan proposition. This loan helps agribusiness
customers to invest in eligible on-farm practices and
projects such as solar, bioenergy, establishing trees or
increasing ground cover and crop or pasture diversity,
improving soil and water conservation and building drought
resilience. This product can support customers seeking
to manage nature-related impacts (e.g. water use) and
dependencies (e.g. soil quality).
• Contributing to the Australian Banking Association’s (ABA)
feedback on the TNFD. Feedback drew on implementation
challenges identified through the UNEP FI pilot process.
• Participating in a UNEP FI project designed to support
financial institutions in understanding the role of nature
scenarios (a similar concept to climate scenarios). Such
scenarios can help decision-makers by establishing an
agreed definition of the future status of nature e.g. how
might soil quality change and what risks and opportunities
may arise for the productivity of agribusinesses as a result.
• Business finance for green equipment. This product
• Taking part in the Australian Government’s TNFD education
can support on-farm emission reductions. This includes
equipment such as energy efficient tractors; best-in-class
combine, cotton and sugar cane harvesters; and energy
efficient irrigation. This product can support customers
seeking to manage nature-related impacts, such as
GHG emissions.
Partnerships to provide useful insights for customers
• Farming for the Future. This industry-led program seeks to
help farmers make informed decisions about sustainable
long-term management of natural assets to optimise
production, build resilience and reduce risks. NAB is
providing opportunities for customers to be involved in
the program.
• Climateworks Centre, Natural Capital Investment
Initiative. In 2023, NAB supported the continued
development of the Natural Capital Measurement
Catalogue project, which included the launch of an
open-access web-based interface where users can
select metrics and methods for the measurement of
natural capital assets, flows of services or benefits, and
organisational impacts or dependencies on nature.
• Greening Australia / World Wide Fund for Nature-Australia
(WWF). The NAB Foundation is supporting primary research
by Greening Australia and WWF on the efficacy of nature-
based solutions for enhancing environmental resilience to
fire through configuration of vegetation. This multi-year
project is moving to implementation phase which includes
establishing a demonstration site.
For more information, refer to the Community Investment
section of this report (page 47).
and awareness raising program.
Lessons from the UNEP FI pilot
NAB's participation in the pilot has supported
identification of key challenges associated with the
TNFD recommendations. These include:
1. Technical aspects of the guidance. For example,
the LEAP process is presented as a linear process,
however, an iterative process that draws on new
information as it becomes available would help
reduce the potential for a given decision or
assumption to result in compounding errors.
2. Availability and accessibility of data and tools
to support the assessment. Many tools used
during the pilot are global in nature and do not
always fully represent Australian conditions. This
may lead to inaccuracies in assessed impacts and
dependencies. LEAP also assumes that financial
institutions have access to customer data that is
not currently collected, e.g. water consumption and
efficiency measures.
3. Organisational capacity. Using the LEAP process
requires familiarity with a broad range of
environmental issues and analytical skills and
systems which support geospatial data analysis.
Many businesses, including banks, do not currently
have this capability. Furthermore, time will be required
to develop the capacity of assurance providers, who
will be required to support the implementation and
preparation of nature-related disclosures.
(1) The LEAP process encompasses: Locate interface with nature. Evaluate dependencies and impacts. Assess material risks and opportunities. Prepare to respond
and report.
40
National Australia Bank
Climate change and environment (cont.)
Assessing nature-related impacts and dependencies
The LEAP guidance suggests that organisations evaluate their material nature-related impacts and dependencies to understand
where risks and opportunities may arise. During 2023, NAB undertook a preliminary assessment of its nature-related impacts and
dependencies. A summary of the results of this assessment is provided in Figure 3.
Defining nature-related impacts, dependencies, risks and opportunities
The TNFD draws on the following definitions with respect to nature:
Impacts. Changes in the state of nature (quality or quantity), which may result in changes to the capacity of nature to provide social and
economic functions. Impacts can be positive or negative. They can be the result of an organisation’s or another party’s actions and can
be direct, indirect or cumulative.
Dependencies. Dependencies are aspects of environmental assets and ecosystem services that a person or an organization relies
on to function. A company’s business model, for example, may be dependent on the ecosystem services of water flow, water quality
regulation and the regulation of hazards like fires and floods; provision of suitable habitat for pollinators, who in turn provide a service
directly to economies; and carbon sequestration.
Risks. Potential threats (effects of uncertainty) posed to an organisation that arise from its and wider society’s dependencies and
impacts on nature.
Opportunities. Activities that create positive outcomes for organisations and nature by creating positive impacts on nature or mitigating
negative impacts on nature. Nature-related opportunities are generated through impacts and dependencies on nature.
Source: TNFD glossary (Version 1.0, September 2023)
The analysis identified that the most material customer-related impacts on nature are associated with the agriculture,
construction, manufacturing, mining, energy and utilities industries, and transport and storage. The highest impacts on nature
across the portfolio relate to land and water use, GHG emissions and waste production.
The industries that were found to have the most material dependencies on nature were: agriculture, fishing, forestry, energy and
utilities. The preliminary analysis identified that the key dependencies customers have on nature-related matters are: climate
regulation, fibres and other materials, flood and storm protection, access to ground and surface water.
The assessment draws on the global Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) tool developed by the
UNEP World Conservation and Monitoring Centre. A number of adjustments were required to better reflect the Australian and NAB
context. Owing to these adjustments, NAB will continue to refine its assessment. The finalised assessment will contribute to the
TNFD roadmap the Group is developing.
Figure 3: Preliminary assessment of NAB's lending portfolio and nature-related impact and dependency areas
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Notes: The ENCORE tool assesses impacts and dependencies across 11 sectors, 138 sub-industries and 86 processes. These
categories were manually aligned to sectoral/industry groupings used by NAB. For some areas, it was not possible to achieve
complete alignment, resulting in the following portfolio areas being excluded from the assessment: personal lending, residential
mortgages, commercial property, and government. To gain greater insights, some industry groupings were disaggregated,
e.g. agriculture, fishing, forestry and mining were assessed as separate categories. Within the tool, 11 aspects of natural
capital impact are considered, including non-GHG air pollution, solid waste, water pollutants and water use. For dependencies,
29 aspects are considered, including animal-based resources, plant-based resources, flood protection, and pollination.
These impacts and dependencies were reviewed with reference to NAB’s industry categories and with respect to common
Australian production processes. The assessment has been undertaken from the perspective of the primary industry of
impact or dependency. For example, 'Telecommunication' considers the operation of telecommunication businesses, whereas
‘construction’ considers the impact of telecommunication-related construction activities.
2023 Annual Report
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Climate change and environment (cont.)
Managing nature-related risk
Increasing capability
Building on the UNEP FI pilot findings, NAB is developing
capability to more accurately geo-locate agricultural
customers assets through its FarmID database (under
development). While initially intended to support the
identification of exposure to climate-related hazards, the
analytical infrastructure will provide the foundation for
understanding a range of nature-related risks in the future.
External engagement activities
During 2023, NAB participated in the following external
engagement activities:
• Consultation on the agenda for the Australian
Government's Global Nature Positive Summit to be held in
Sydney in 2024.
• The Australian Sustainable Finance Institute’s (ASFI) Natural
Capital Advisory Group (NCAG) for the ‘Valuing Natural
Capital’ partnership. NCAG comprises representatives from
financial institutions and seeks to inform the development
of nature-related metrics and enabling tools that will
allow the integration of nature considerations into
financial decision-making.
• The Science-based Targets for Nature Regional Strategy
Working Group (Australia and New Zealand/Aotearoa). This
group of industry, peak-body membership associations and
professional-services firms aims to establish a framework
to help businesses better understand and pilot nature-
based disclosure frameworks and reporting, especially
regarding science-based targets.
Quick link
nab.com.au/about-us/sustainability/
environment/natural-capacity-resource-management
Sustainability Risk, which includes biodiversity and other
nature-related risks, is one of the Group's material risk
categories, managed through the Group's Risk Management
Strategy and Framework (further information about NAB's
ESG risk management is provided on page 88 of the Risk
Management section of this report).
Nature-related risks considered within the Group's ESG risk
assessment processes include those related to:
•
Forests.
• Water.
• Biodiversity.
We regularly update and improve how we incorporate
environmental risk into our risk management framework,
policies and processes in response to changes in technology,
regulation, voluntary initiatives and societal expectations.
Managing deforestation risk
Deforestation and other forms of land clearing can be
a key threat to biodiversity. The Group is aware of
increasing concern about the impact of legal deforestation
on biodiversity loss and is engaging with stakeholders to
understand the different perspectives and to determine how
it may be best placed to respond.
The Group takes allegations of illegal land clearing by its
customers very seriously. If we become aware that customers
are engaged in, or alleged to be involved in, illegal land
clearing, the Group reviews the matter and takes action, as
appropriate, in line with risk appetite and the Group's ESG,
Credit and Financial Crime policies and processes.
This may involve supporting customers as they undertake
remediation. Where issues are material, or systemic, or
are not remediated, the Group may consider exiting the
customer relationship.
The Group aims to identify and manage the risk of illegal
land clearing, and understand the impacts associated
with land clearing on biodiversity and ecosystems, where
appropriate, through its existing credit risk assessment and
due diligence processes.
If potential ESG risk issues are identified as part of risk-based
screening, or bankers identify a customer's involvement in
high-risk sectors or activities, then customers are subject
to more detailed ESG risk assessment and due diligence in
accordance with exposure-related trigger thresholds. See
page 53 for detail on how ESG issues, including those
related to land clearing, are included within NAB’s credit risk
assessment and due diligence processes.
42
National Australia Bank
Technology, data and security
Why it matters
Delivering exceptional customer and colleague experiences is underpinned by resilient and safe technology, that is simple and
easy to use.
What NAB is doing
NAB's technology strategy, data security and privacy management
NAB continues building a sophisticated security function to protect our business, our customers, and the community from
evolving cyber security threats.
During 2022 NAB refreshed its technology strategy for the next five years. Building on our cloud first foundations established in
prior years the strategy aims to deliver improved technology driven customer and colleague outcomes, while also:
•
Further building resilience, ensuring our services are
always on.
• Simplifying and strengthening our technology estate and
reducing complexity.
• Reducing technology and cyber related risk to better
• Protecting customer data and ensuring it is
protect NAB and our customers.
used appropriately.
In addition, this section will cover how NAB is continuing to enhance its ability to deter, detect, disrupt and prevent
financial crime.
Eight focus areas underpin our technology strategy:
Focus areas
Digital first
Customers and colleagues expect to interact in real time, and with the latest personalised functionality regardless of
the channel they use.
Simplify & automate
Reduce complexity in technology, and improve NAB's ability to react quickly to change.
Data like electricity
Data creates insights and actions to improve customer interactions, with customers demanding more
personalised experiences.
Secure by design
NAB must be proactive and strengthen our defences to keep the Bank and customers safe.
Platform mindset
NAB must modernise our technology to be simpler, modular, and more resilient that removes duplication and caters
for business needs.
Expert engineering
Quality technology delivery requires strong, capable and highly efficient engineers supported by appropriate tooling
and processes.
Delivery excellence
Removing the impediments and inconsistencies in the way NAB delivers technology change, which impacts speed,
cost, and quality of outcomes.
Best technology colleagues
To deliver on the strategy, NAB must attract, retain and develop top technology talent in a highly competitive
talent market.
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Technology, data and security (cont.)
Resilient, safe and simple services
Simple
A key element of our technology strategy is the consolidation
of legacy technology applications onto standardised
enterprise platforms. Over time, this will both simplify our
operating environment and provide modern services which
are more fit for purpose.
• Modernising key business applications: In 2023 NAB
completed the modernisation of two legacy core
banking applications.
– Migration of ubank customers to a modern platform,
improving the banking experience, and decommissioning
the legacy.
– Migration of our Trade Finance business to a new
platform, with involves less manual processing and
enables better compliance.
• Simple technology for colleagues: In addition, NAB has
made it simpler for our bankers by completing:
– Migration of ~3,000 additional bankers to an enterprise
customer relationship management platform (now ~70%
complete overall), providing bankers with world-class
tools to service customers.
– Migration of all bankers to a Cloud-based call centre
platform with AI powered call routing, providing greater
flexibility in managing customer calls.
• These examples represent some of decommissioning
outcomes delivered during 2023, which saw NAB
decommission 13% legacy applications.
Building on our cloud foundations established in prior years,
our technology strategy has delivered significant customer
and colleague improvements, while continuing to improve the
resilience of our services, and keeping our customers and
NAB safe in an environment of ever-escalating fraud, scams
and cyber threats. In addition, we continue to simplify and
modernise our environment, to improve the services and
experiences we deliver to our customers and colleagues. Key
outcomes in 2023 include:
Resilient
• Cloud migration: Migrating applications to cloud based
services has been key to improving technology service
resilience. Building on progress in recent years, 77% of
applications have been migrated and we are on track to
meet our target of 83% in 2024.
• Reducing incidents: NAB achieved a 17% year-on-year
reduction in critical and high impacting incidents, with
critical and high incidents down 83% since 2018, driven by
cloud migration and service improvements.
• Service availability: In 2023, the average availability of our
top 47 critical services was 99.89%, ensuring customers
could access our systems when they need. For several
critical services, NAB is ranked number one in six of seven
Retail Payments Service Reliability categories (of the Big
four), based on analysis of disclosures provided to the
Reserve Bank of Australia since Q3 2021.
Safe
• Cyber and Tech Risk investment: To combat increasing
cyber threats, NAB has invested significantly in cyber
security and technology risk reduction over 3 years.
• Cyber capability: In 2023 we achieved our target National
Institute of Standards and Technology (NIST) Cyber security
capability maturity level (across people, process, and
technology). The National Institute of Standards and
Technology (US Government) Cyber Security framework
helps businesses understand, manage and reduce cyber
security risks. This improvement has seen our time to
contain cyber threats reduce by 51% since 2019.
•
Intelligence information sharing: To improve cyber defence
effectiveness NAB has continued to collaborate with
various Federal agencies to share information and adjust
our response to organised cyber activity. Further detail is
provided in the Investing in Security section.
• New protection for Customers: To further protect
customers, several new features have been implemented
during 2023. This includes new customer phishing and
scam protections, including the removal of links in
SMS and emails, contributing to a reduction in scam
payments. In addition, NAB has recently announced our
participation in an industry digital identity verification
service (Connect ID), which helps customers securely share
their identity information.
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National Australia Bank
Technology, data and security (cont.)
Privacy management and data ethics
NAB’s transparent, compliant, and ethical collection and use
of data is key for earning trust with colleagues and customers.
Protecting customer and colleague privacy
NAB's customers rely on us to protect their personal
information, and to ensure their interests are protected in
the use of the data. NAB has a specialist Global Privacy Office,
which establishes data protection and use principles, to make
sure colleagues are aware of their responsibilities. These
responsibilities are embedded into the way NAB works, and
support transparent, fair and compliant use and sharing of
personal information of our customers and colleagues.
NAB's Data Ethics Framework goes beyond legal compliance,
to consider not if NAB can use data (legally or otherwise),
but whether we should. NAB’s Data Ethics Principles set out
how we should responsibly use data and guides how data is
used in analytics, machine learning, artificial intelligence (AI)
and sharing with third parties. These Data Ethics Principles are
brought to life through a Data Ethics assessment process. By
ensuring the responsible and sustainable use of data, NAB can
make better decisions.
Data collection, storage, retention and destruction within
NAB is governed by the NAB Records Management Policy
Standard. The Standard is supported by a series of
Record Retention Schedules which ensure compliance in
recordkeeping obligations across all regions.
Investing in security
NAB continues to build a sophisticated security function to
protect our business, our customers, and the community from
evolving cyber security threats.
Cyber security is recognised as one of NAB’s key risks, and
is closely monitored with regular updates on the threat
landscape, security strategy, capability, incidents, issues and
progress on risk reduction and performance metrics.
NAB has made progress on our refreshed security strategy,
to strengthen our security foundations and has significantly
improved security capability aligned to the National Institute
of Standards and Technology's (NIST) Cyber Security
Framework (CSF). External firms independently review and test
this security capability.
Having world-class security talent is critical. In 2023 our
security colleagues participated in specialist training and/or
certification from global security providers.
NAB has expanded our security workforce across multiple
regions globally, extending coverage and capability around
the clock.
NAB is focused on a collaborative approach to drive national
outcomes that protect businesses and individuals from cyber-
enabled crime. As part of this approach NAB is partnering with
Security Centres, agencies and research groups.
NAB has strengthened and uplifted its governance
frameworks, associated reporting and forums. This has
enabled NAB to improve visibility, oversight, consistency in
security posture, capability maturity, and achieve broader
business benefits across NAB.
Building customer capability
NAB is helping customers and communities become
more secure by delivering customer cyber security
and fraud detection sessions to more than 6,000
people across Australia in 2023. These sessions provide
customers and community members with information
on the current cyber and fraud threat landscape,
and provide practical advice on how they can
protect themselves.
For more information on these sessions, additional
resources including NAB Security’s security podcast and
advice on identifying and responding to scams and
frauds, refer to nab.com.au/security.
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Scams and fraud
Increasingly sophisticated use of scams and technology
to target customers and the financial system requires
an ever-evolving approach to fighting financial crime.
The fight against these crimes has been a focus for NAB
this year, and through the execution of the multi-year
Scams Strategy launched last year, NAB has:
• Delivered a number of initiatives throughout the year
to combat scams and fraud.
• Deployed behavioural technologies to identify scams
and fraud, alongside assistive tools like SMS
messaging to engage customers who might be
at risk.
• Continued to educate customers and the community
on how to identify scams and to raise awareness of
the financial and emotional impact they cause.
Quick link
For more information on how NAB
protects itself and our customers against
financial crime, visit nab.com.au/about-us/corporate-
governance/managing-financial-crime
Technology, data and security (cont.)
Financial crime
Financial crime has a devastating impact on NAB’s customers
and community. NAB has zero tolerance for criminal activity
and remains dedicated to effectively managing financial crime
risk and keeping customers, communities, and the financial
system safe.
NAB plays an important role in the monitoring and
reporting of suspicious activity and complies with anti-
bribery and corruption, economic and trade sanctions, and
AML/CTF regulations.
Delivering the agreed plan for the AUSTRAC EU, entered
into in April 2022 to address AUSTRAC’s concerns with NAB’s
compliance with certain AML and CTF requirements remains a
key priority. Refer to Risk management section on page 86 for
further detail.
In addition to addressing regulatory commitments and
remediating issues, we continue to make significant
enhancements to our ability to deter, detect, disrupt and
prevent financial crime. This year NAB has:
•
Invested in colleagues, data and technology systems to
enhance controls, monitoring and risk assessment models
to strengthen the management of financial crime risk.
• Enhanced its AML/CTF Program and preventative and
detective controls (beyond the requirements of the EU) to
better mitigate current and emerging financial crime risks.
• Developed our financial intelligence-led capabilities to
enhance identification of emerging financial crime risks
and minimise the threat posed by criminal exploitation of
NAB’s products and services.
• Safely and securely utilised machine learning and AI to
reduce manual handling and improve the accuracy and
pace of detecting and preventing financial crime threats.
• Provided financial crime training to colleagues and the
Executive Leadership team to support them in their role
to mitigate the risk of financial crime at NAB, including
on money laundering / terrorism financing, bribery and
corruption, sanctions, and scams and fraud.
The past 18 months of sanctions, export, and import controls
have been unprecedented in their scope, complexity, and
impact. Enforcement by global sanctions regulators remains
significant, with USD 1 billion in penalties issued globally in
financial year 2023. To ensure compliance NAB has continued
to improve its Sanctions Compliance Program, including
implementing a new trade screening program and enhancing
our controls for the identification and monitoring of high
sanctions risk customers.
NAB also plays a crucial role by collaborating with law
enforcement, alliances and Government agencies in Australia
to combat financial crimes impacting our community,
colleagues and customers. This helps NAB identify, investigate
and/or disrupt money laundering, fraud, national security, drug
trafficking and human impact crimes, which have detrimental
impacts to our society.
NAB continues to execute the financial crime strategy which
was launched in 2022. While NAB is making good progress, the
nature of the threat and risk it presents requires ongoing
vigilance and pursuit of best practice in all that NAB does.
46
National Australia Bank
Helping our communities prosper
Community investment
NAB's community investment is centred on supporting people
and organisations that help our communities prosper.
NAB’s reporting of community investment is guided by the
Business for Societal Impact (B4SI) Community Investment
Framework(1). This includes money, time through volunteering
and NAB also reports forgone revenue from products and
services provided for community benefit.
Key contributions to NAB's community investment included:
NAB Foundation
NAB Foundation is a registered charity that uses
philanthropy, social investment and in-kind support to
fund social and environmental progress in Australian
communities served by NAB. By funding the people
and communities who make a real difference, the NAB
Foundation aims to help tackle social and environmental
challenges relevant to NAB, natural disasters, climate
transition, indigenous economic advancement and
affordable housing.
• Skilled volunteering projects for not-for-profits in
partnership with Australian Business Volunteers and Jawun.
Partnerships
NAB Foundation funds a number of community
organisations investing in disaster resilience through
NAB's flagship program, NAB Ready Together.
Providing grants
The NAB Foundation Community Grants program funds
local community ideas and projects to prepare for and
recover from disasters Australia-wide.
NAB Foundation's Environmental Resilience Fund
supports practical projects that build environmental
resilience to disasters and climate change.
For more information on NAB Foundation's Community
Grants program and Environmental Resilience Fund, refer
to the NAB Ready Together section on page 48.
Donations
NAB Foundation provided support for Australians for
Indigenous Constitutional Recognition (AICR) and the
Uluru Dialogue. In support of housing and homelessness,
NAB Foundation donated to the Salvation Army’s
Red Shield Appeal, Melbourne City Mission and other
organisations focused on humanitarian initiatives
across Australia.
Investments
NAB Foundation uses impact investment to generate
social and environmental impact. In 2023, NAB
Foundation invested in seven impact investment funds,
representing up to 10% of its portfolio. NAB Foundation
invests all corpus assets with a socially responsible
investment position.
• Disaster relief grants to support customers and colleagues
impacted by natural disasters.
• Revenue foregone through the provision of no-interest
capital and products as part of NAB's 20-year partnership
with Good Shepherd.
• Donations to NAB Foundation to significantly increase
its size and scope. The NAB Foundation corpus has
grown to $110 million in 2023, more than triple its size
compared with 2021. This investment has permanently
increased NAB Foundation’s capacity to provide long-
term stable funding for programs and partnerships with
community organisations.
Volunteering
As a workforce of more than 38,000 colleagues, we can
have significant impact as volunteers in the community. Every
NAB colleague has at least 16 hours each year available
to volunteer their time and talents to support communities
via general volunteering, skilled volunteering and supported
longer-term secondment program partnerships.
While volunteering take-up remains below pre COVID-19 levels,
NAB has seen a 90% increase in hours year on year, largely
driven by an increase in volunteer opportunities available with
NAB community partners including The Salvation Army, Save
the Children, Disaster Relief Australia and Girls on Fire.
NAB Neighbourhood
NAB Neighbourhood is NAB's platform to engage colleagues
and community organisations in philanthropic initiatives.
Colleagues can participate in volunteering, giving, fundraising
and granting activities to support causes they care about.
Chart 3: Group community investment ($m)
100
50
0
64.6
51.2
42.8
45.7
79.2
2019
2020
2021
2022
2023
(1) Corporate Community Investment, defined broadly as businesses’ voluntary engagement with charitable organisations or activities that extends beyond their core
business activities. Learn more at https://b4si.net/framework/community-investment/
2023 Annual Report
47
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Helping our communities prosper (cont.)
NAB Ready Together
With Australians continuing to face natural
disasters, there is a growing need for ongoing
community support and innovation. NAB will
help by supporting our customers and their
communities to withstand and recover from
natural disasters.
Going above and beyond for NAB customers from
disaster to recovery
Over the past year, communities across Australia were
impacted by natural disasters including floods and cyclones.
NAB provided $557,000 in disaster relief grants to customers
and colleagues impacted by floods in NSW, VIC, TAS, SA, WA
and NT.
Helping communities to build their resilience and
recover from natural disasters
The NAB Foundation Community Grants program offers grants
to local community-led projects for disaster readiness and
recovery across Australia. It aims to award a total of $1 million
annually in grants of up to $10,000 each, with an additional
$200,000 available for up to eight projects that demonstrate
potential to scale impact.
In calendar year 2023, NAB Foundation awarded community
grants to more than 100 organisations totalling $1.2 million.
Initiatives focused on education, training, emergency systems,
preparedness plans, mental health support, infrastructure,
equipment, community cohesion, and wildlife and natural
environment rehabilitation.
"I felt an obligation to help out"
Additional support is available. For more information on how
NAB supports customers with financial hardship assistance,
see page 26.
When floods hit Brisbane in 2011, NAB’s Ilyas Livanes was
part of the 'Mud Army' who volunteered to help with the
clean up.
Partnering to support Australia's disaster
relief volunteers
It takes many hands to get communities back up and running
after a disaster. That is why NAB and the NAB Foundation
partner with disaster relief organisations to help communities
recover faster.
In 2023 NAB Foundation announced a flagship partnership,
providing $1 million in funding to help Disaster Relief Australia
(DRA) bolster its community and corporate volunteer capacity
over the next two years. The partnership will assist DRA to
recruit and manage more than 3,000 community members on
stand-by to volunteer.
In addition, we are:
• Working with Girls on Fire to expand its fire and resilience
programs across Australia to improve gender diversity and
inclusion in the emergency services sector.
• Supporting QLD Rural Fire Service to develop and
deliver an Indigenous traditional burning training program,
teaching participants about traditional fire and land
management practices to reduce disaster risk and
improve preparedness.
NAB colleagues are encouraged to support communities
impacted by disasters. NAB provides unlimited crisis leave
to colleagues who volunteer with emergency services along
with access to two days of general volunteering and disaster
preparedness leave for all colleagues. In 2023, NAB colleagues
contributed more than 1,400 volunteer hours with disaster
relief organisations.
“I’m a born and bred Brisbanite and I felt like the city and
its people were hurting,” he said.
“I had water up to my front door, but it didn’t matter. I just
wanted to help.”
In the floods of 2022, Ilyas was there again, alongside
a group of volunteer veterans, emergency services
personnel and civilians from DRA.
“I saw the ingenuity of the people helping and how well
the organisation behind it was working,” Ilyas said.
This inspired other NAB colleagues to use their volunteer
leave to support communities impacted by flooding
across Victoria and South Australia towards the end of
2022 and beginning of 2023.
NAB Foundation partners with DRA to help it build
community and corporate volunteer capacity to support
communities to recover.
For Ilyas, this is a great opportunity for NAB colleagues to
use their volunteer leave to support the DRA’s efforts.
“It makes me feel good…In our privileged position where
NAB colleagues get that volunteer leave every year, as
long as we have the appetite to continue to use it, it’s a
step in the right direction.”
48
National Australia Bank
Helping our communities prosper (cont.)
Investing in nature-based solutions
NAB Foundation's Environmental Resilience Fund supports
practical projects that build environmental resilience to
natural disasters and climate change.
NAB Foundation funds the Climate-ready Restoration
partnership with Greening Australia and World Wide Fund
for Nature-Australia. The funding enables fire experts and
local communities in south-eastern Australia to test green
firebreaks to manage disaster risks. The project aims to
restore ecosystems by improving biodiversity, as well as
engaging Indigenous Australians to assess the feasibility of
cultural burning and other Indigenous-led land management
practices. The project also includes a rewilding and cultural
burning program. NAB Foundation is providing $2 million to the
partnership over three years.
The project is in its second year and is moving to
implementation phase. A demonstration site showing a green
firebreak configuration will be established in Western Sydney.
The construction of predator-free fence has meant that
Eastern bettongs have been successfully reintroduced to
Yiraaldiya National Park in NSW. Bettongs are a small hopping
marsupial related to kangaroos. They protect and restore
ecosystems by reducing leaf litter, promoting healthy soils
and seed germination.
See page 40 of this report for more information on NAB's
approach to managing biodiversity and natural capital.
Quick link
nab.com.au/nabreadytogether
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2023 Annual Report
49
Helping our communities prosper (cont.)
Respecting human rights
NAB recognises the fundamental worth of
all people by respecting human rights.
A commitment to respecting human rights is a core
foundation for our Group Human Rights Policy, the approach
to ‘How we work’, and our codes of conduct. It is also
integrated within a number of key voluntary initiatives
to which NAB is a signatory, including the Principles
for Responsible Banking and the United Nations Global
Compact. Further information about NAB's approach to
human rights and a copy of the Group Human Rights Policy
is available on nab.com.au/about-us/sustainability/reporting-
policies-approach/human-rights-approach.
As a financial institution, NAB contributes to economic
and social development that is necessary to underpin the
protection of human rights – through our direct operations,
the financial products and services we provide, and the
wages and taxes that we pay. NAB and BNZ provide access to
finance for disadvantaged groups, support businesses which
provide jobs and economic growth and provide financing for
key infrastructure.
Exposure to human rights risk
NAB recognises that human rights concerns may arise not
only in our own operations, but also via interactions with
external third parties. As a financial services organisation,
NAB is exposed to human rights risk through five key
channels: banking operations, customer relationships, supply
chain management, private wealth-related services and more
generally through the communities we serve.
For each of these channels, NAB considers its most salient
human rights issues(1)and related vulnerable groups. Examples
of relevant salient human rights issues include:
• Health, safety, security and wellbeing
• Customer financial resilience and hardship
•
Fair and responsible products and services
• Accessibility
•
Indigenous rights and inclusion
• Modern slavery
• Corruption and bribery
• Diversity and inclusion
• Collective bargaining
• Gender Equity
• Data ethics, AI and human rights.
These issues are considered as part of our risk management
practices when determining mitigating actions.
NAB's 2023 Sustainability Data Pack(2) provides a content index
on key external human rights frameworks and our salient
human rights issues, including references to where they have
been addressed in greater detail within NAB's 2023 annual
reporting suite.
Managing human rights risk
Human rights risk is an ESG risk considered as part
of Sustainability Risk within the Group's Risk Management
Strategy and Framework and risk appetite, including our
sensitive sectors and areas list and divisional Credit
Appetite Strategies. This is supported by ESG risk
assessment in customer and supplier related on-boarding
and review processes. Refer to the Environmental, Social and
Governance (ESG) Risk Management section on pages 53 to
55 for further detail on how ESG Risk (including human rights)
is managed, using a risk-based approach, within lending and
sourcing activities.
Human rights risk assessment and due diligence
NAB seeks to proactively identify, assess and address
human rights risks and impacts that may arise in business
relationships with customers and suppliers, as outlined in
our Human Rights Due Diligence process. This includes issues
such as poor labour practices, modern slavery, Free, Prior and
Informed Consent, and improper land acquisition.
In 2023, through our ESG risk assessment processes (which
form part of the credit risk and due diligence process),
including media scanning, we identified a small number of
customers with potential human rights and modern slavery
concerns within their operations or supply chains. Further
investigation and/or customer engagement has confirmed
some instances of poor labour practices and/or other
potential human rights concerns. NAB and BNZ have taken
action, engaged relevant customers and are monitoring the
actions these customers are taking to address the issues,
as appropriate.
NAB identified a number of instances of possible human
exploitation by its customers that were investigated and
reported to AUSTRAC and law enforcement as required. Further
action was taken as appropriate. Similarly, in New Zealand, BNZ
investigated several instances of possible human exploitation
by its customers and reported these to the NZ Police Financial
Intelligence Unit (FIU) as required. No instances of modern
slavery or human trafficking were identified in NAB’s own
operations or its supply chain.
Managing grievances
NAB's human rights grievance process sets out how human
rights issues and concerns are investigated and acted
upon. One of the mechanisms provided for the receipt of
human rights-related feedback and concerns is our mailbox
grievances@nab.com.au. Grievances received in this mailbox
are referred to the appropriate area for investigation and
action. To ensure individuals wishing to raise human rights-
related concerns understand the process, NAB's website
contains guidance, in multiple languages, on how to lodge a
human rights concern. In 2023, we received one grievance
via the mailbox, from six Tiwi Islands Traditional Owners and
one Larrakia Traditional Owner. Similar complaints regarding
the same customer were received by 11 other Australian and
international banks. NAB has since considered and provided a
response to that human rights grievance.
Customer-related human rights concerns may be received
directly by NAB, or via external dispute resolution bodies
such as Courts and human rights and/or equal opportunity
commissions or tribunals. For example, in 2023, NAB received 13
complaints alleging discrimination that were filed in Courts or
human rights/equal opportunity commissions or tribunals. Of
those 13 complaints, 10 were made by customers and 3 were
made by colleagues or former colleagues.
Colleague concerns regarding human rights are managed
through employee relations processes or via our
Whistleblower Program (refer to How We Work on page 82).
In 2022, NAB engaged a specialist business and human
rights advisory firm to review its human rights grievance
mechanism against the effectiveness criteria set out in the UN
Guiding Principles on Business and Human Rights. The review
(1) Salient human rights issues are those human rights that are at risk of the most severe negative impact through the Group’s activities or business relationships.
(2) Refer to nab.com.au/annualreports.
50
National Australia Bank
Helping our communities prosper (cont.)
identified several areas where NAB could make incremental
improvements to strengthen our grievance mechanism. As a
result, a number of small changes were made to guidance for
colleagues in 2023.
Human rights areas of focus
A number of human rights areas are of interest to our
stakeholders, including:
•
•
Indigenous inclusion and support: NAB is taking steps
to support growth in Indigenous business, employment
prospects and reconciliation (refer to page 28 which
provides more detail on how NAB is helping Indigenous
businesses prosper and supporting reconciliation). Also
refer to page 28 which gives further detail of BNZ's
Māori strategy.
Inclusion and diversity: NAB's priority areas include:
inclusion, accessibility, gender diversity, flexible working
and supply chain diversity. Refer to page 32 for more detail.
• Modern slavery: The Group is taking steps to address
modern slavery risk in our value chain as outlined briefly in
the section below and in more details in the Group's Modern
Slavery and Human Trafficking Statement.(1)
• Enterprise bargaining and payroll review: NAB received
majority support from colleagues on the 2024 Enterprise
Agreement (refer to page 36).
• Climate change: Climate change and climate-related
natural disasters can have negative impacts on human
rights, including the rights to life, food, health, water
and places to live and work. We are taking steps to
manage our own climate impact as well as considering
the climate impacts of our customers and the need
for a just transition. NAB is the only Australian company
participating in the United Nations Global Compact's Think
Lab on Just Transition (“Think Lab”). NAB contributed to
the Think Lab's work to shape business and thought
leadership on critical areas linked to just transition. NAB's
2023 Climate Report(2) details our approach to climate
change, covering governance, strategy, risk management
and metrics and targets.
• Disaster support: When communities where NAB operates
are threatened by natural disasters, NAB's Ready Together
program provides support to help them withstand the
events and recover (refer to page 48).
• Financial hardship: NAB is proactively supporting
customers with financial hardship assistance (refer to
page 26).
• Technology, ethics and human rights: AI can improve
efficiency and increase customer satisfaction when
engaging with banking services. However, given the
important role banks play in helping Australians to manage
their wealth, it is important that when integrating AI into
bank decision-making, it is done ethically and with human
rights at the forefront. For this reason, in 2023, NAB
partnered with the Australian Human Rights Commission to
develop and produce a human rights impact assessment
tool for AI-informed decision-making systems in banking.
Refer to further detail in the highlighted case study.
Case Study: Assessing the human rights impact
of AI
Automation is increasingly becoming a key area for
banks, and while technological change can lead to
advancements, there are also risks that arise from
implementation that need to be well considered and
balanced. AI systems have the capability to improve
efficiency and increase customer satisfaction when
engaging with banking services, and due to the special
relationship that banks have with their customers, it is
critical to ensure that any decision-making that uses
AI systems is made ethically and with consideration to
human rights.
The Australian Human Rights Commission ('the
Commission') sought to develop a Human Rights Impact
Assessment (HRIA) Tool following its publication of
recommendations in its Final Report: Human Rights and
Technology including that private sector bodies should
be encouraged to undertake HRIAs before using AI
systems and that tools should be developed to assist
them in doing so.
The aim of the HRIA Tool is to assist banks in considering
and measuring the risk to human rights posed by AI
systems, implement strategies to address those risks
and support the availability of remedies for any human
rights violations.
The Commission's partnership with NAB provided an
opportunity to consult with our data ethics and analysis
experts for feedback on the practicality and useability
of the questions incorporated into the HRIA Tool. NAB
considered it a valuable opportunity to help develop the
HRIA Tool as it recognised that it is in both banks' and
customers' interests, to ensure that it measures the risk
to human rights posed by AI activities and to implement
strategies to address those risks.
In order to support development of the HRIA Tool,
NAB coordinated input from a cross-functional group
of colleagues working in areas including data science,
human rights, finance, legal and customer service.
The HRIA Tool builds upon the Commission’s work to
develop practical guidance for the ethical use of AI
systems for various sectors and businesses.
Traditionally, banks employ a range of risk assessment
tools. This tool can be tailored by banks and integrated
into their data ethics assessment processes. To
date, NAB has included various human rights specific
questions into our own data ethics assessment process
for review of more general data use cases. Now we
will also consider human rights as a part of the risk
assessment when considering use of AI tools.
Copies of the Commission's Final Report: Human Rights
and Technology and the HRIA Tool are available on the
Commission's website at https://humanrights.gov.au.
(1) Available at nab.com.au/about-us/social-impact/modern-slavery-statement.
(2) Refer to nab.com.au/annualreports.
2023 Annual Report
51
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emerging child exploitation threats facing our customers
and the community.
• Clean Energy Council's Risks of Modern Slavery Working
Group. Our participation in this working group is providing
input into an internal review of modern slavery in the
renewable energy sector. Refer to the case study below.
Case Study: Corporate and Institutional
Banking – Modern Slavery in the Renewable
Energy Sector
Corporate and Institutional Banking has supported
renewable energy infrastructure over many years and
through application of our ESG risk assessment process
potential modern slavery issues have been identified in
the solar supply chain. The Clean Energy Council (CEC)
in conjunction with Norton Rose Fulbright published a
report titled ‘Addressing Modern Slavery in the Clean
Energy Sector’ in November 2022 on risks and challenges
in the renewables supply chain.
Collaboration is taking place across the renewable
energy industry globally. The challenges are complex
and will take time to resolve but increasing transparency
and willingness of customers to acknowledge issues
and implement strategies to reduce and eliminate
modern slavery risks will contribute to a just low
carbon transition.
In 2023, NAB commenced an in-depth review of modern
slavery risk in the renewable energy sector. As part of
the review process, NAB has engaged with a number of
relevant customers and referred to a range of external
guidance, including information provided in the CEC
Report and by other international renewable energy
industry bodies, advice from NAB’s internal ESG experts
and other external sources and experts. Progress to
date includes a portfolio review to confirm high risk
jurisdictions and activities are correctly identified and
engagement with external experts to help identify
where we can improve frameworks, guidance and risk
management practices. The next step will be to update
banker guidance.
Helping our communities prosper (cont.)
Modern Slavery
The Group's annual Modern Slavery and Human Trafficking
Statements are made available on our website(1). Our annual
Statement outlines what we have done to manage modern
slavery and human trafficking risk in the Group's operations
and supply chain. The Group has reported against the UK
Modern Slavery Act since 2016, and the Australian Modern
Slavery Act since 2020.
Further information on how we coordinate our modern slavery
prevention activities across the Group is provided in our
annual Modern Slavery Statement. During 2023, key activities
included: assessment of modern slavery risks associated
with new subsidiaries; improvements to internal guidance
for colleagues on our human rights grievance mechanism;
and a review of our third-party risk ESG risk assessment
processes, which include consideration of human rights and
modern slavery.
Building capability
In 2023, modern slavery risk, was included both in annual risk
awareness training for colleagues and in annual training on
financial crime and AML/CTF. NAB achieved a participation rate
of 99.9% for this training.
We also support colleagues with a number of ESG-related
checklists and internal guidance notes on a range of topics
which incorporate human rights-related considerations,
including guidance explaining key elements of our Group
Human Rights Policy for colleagues. Our internal ESG risk
management intranet site provides resources and links to
help bankers understand and identify human rights, including
modern slavery risks and impacts.
Participating in industry working groups
and initiatives
The Group is a signatory to the Principles for Responsible
Banking, Equator Principles and the UN Global Compact,
all of which incorporate human rights-related principles
or requirements. Engaging in industry working groups and
forums enables us to exchange knowledge, learn from
peer financial institutions and other corporates and to
contribute to industry guidance in relation to human rights and
modern slavery.
In 2023, NAB participated in a range of industry working and
activities including the following:
• Responsible Investment Association of Australasia Human
Rights and First Nations' Rights Working Groups
• Australian Banking Association Modern Slavery
Working Group
• UNGC Human Rights Dialogue, where NAB spoke on a panel
promoting the concept of a ‘just transition’ and awareness
of the broader human rights impacts of climate change,
alongside representatives of government and civil society.
This work builds on NAB’s partnership with 'Think Lab'
(available at www.unglobalcompact.org/take-action/think-
labs/just-transition) which has seen the publication of a
series of briefings intended to help businesses practically
engage with the human rights issues raised by climate
change transition and adaptation.
• As part of the Fintel Alliance, NAB contributed to a report
titled ‘Combatting the Sexual exploitation of Children for
Financial Gain’ published by the Fintel Alliance, AUSTRAC,
the Australian Federal Police and the Australian Centre
to Counter Child Exploitation. The Report covers new and
(1) Refer to nab.com.au/about-us/sustainability/reporting-policies-approach/performance-reporting.
52
National Australia Bank
Helping our communities prosper (cont.)
Environmental, Social and Governance (ESG) Risk Management
Managing risk is part of everyone’s role. This is supported by Risk functions, led by the Group Chief Risk
Officer (CRO).
Risk Governance
The CEO oversees enterprise-wide risk management through
the Enterprise Risk & Compliance Committee (ERCC) and its
supporting sub-committees, including the Group Credit and
Market Risk Committee (GCMRC). The GCMRC supports the ERCC
in its oversight of the Group’s management of Credit Risk,
Market Risk and Sustainability Risk and emerging risks and their
related financial implications. This includes oversight of:
• ESG-related policies, including those related to human
rights and environment(1);
• assessment of customer-related ESG risk; and
Figure 2: Summary of ESG Risk management and oversight
• ESG-related risk appetite settings. ESG matters are
escalated to the ERCC, BRCC and the Board as required.
Sustainability Risk was added as a material risk category(2)
within the Risk Management Framework in October 2021. The
Group defines Sustainability Risk as “the risk that ESG events or
conditions negatively impact the risk and return profile, value
or reputation of the Group or its customers and suppliers”.
Climate, nature, and human rights-related risks are included in
consideration of Sustainability Risk, alongside other ESG risks.
The Group's risk frameworks and processes
Effective risk management is fundamental to execution of our
strategy and ability to be a safe and secure bank that serves
customers well and helps our communities prosper. Managing
ESG risk is part of our day-to-day business and it is identified,
measured, monitored, reported and overseen in accordance
with the Group’s Risk Management Strategy, Framework and
reflected in the Risk Appetite Statement (RAS) and relevant
supporting policies and management practices.
We manage ESG risk in an integrated manner as part
of our processes for managing risks across material risk
categories. This is guided by a set of six ESG Risk Principles(3)
comprising an environmental principle, two social principles
and three governance principles. ESG risk assessment is
part of the Group's credit risk assessment and supplier risk
management due diligence processes, and factors into day-
to-day decisions of colleagues.
Additionally, where ESG and associated reputation risk is
high, ESG matters are escalated by customer-facing teams
for discussion and consideration in business units (Business
and Private Banking and Corporate and Institutional Banking)
or subsidiary forums (BNZ) involving senior management,
executive and other key internal stakeholders including Risk
and Corporate Affairs. The Business and Private Banking forum
was formalised in 2023.
Management of ESG risk is operationalised through a number
of supporting key risk frameworks and systems, including:
• Risk Appetite Framework – risk appetite cascades from
the Group RAS, where there are specific ESG-related
tolerances, including fossil fuel related limits. The RAS
operates in conjunction with divisional Credit Appetite
Strategies (CAS) and the Group’s High Risk ESG Sectors and
Sensitive Areas list (‘Sensitive Sectors and Areas List’). Our
Sensitive Sectors and Areas List helps colleagues working
with customers and suppliers know which sectors and
(1) The Group's Human Rights Policy, Group Environmental Management Policy and Group Environmental Reporting and Offset Management Policy are available on our
website here: Explore policies and resources | Research and insights - NAB available at nab.com.au/about-us/sustainability/reporting-policies-approach/policies-
resources.
(2) The material risks managed by the Group are: credit risk, operational risk, compliance risk, conduct risk, balance sheet and liquidity risk, market risk, sustainability risk
and strategic risk. For more information on these, and other principal risks and uncertainties faced by the Group, refer to Risk Factors on pages 89 to 101.
(3) Available on our website nab.com.au/content/dam/nabrwd/documents/reports/corporate/esg-risk-principles.pdf.
2023 Annual Report
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(1) NAB’s major subsidiary, BNZ, also has sustainability-related (including climate) management groups and councils. Details on BNZ’s approach to relevant governance matterswill be available in its climate and sustainability reporting.(2) NAB’s Indigenous Advisory Group is comprised of representatives from the Board, Executive Leadership Team and Aboriginal and Torres Strait Islander leaders from outsideNAB. First Nations colleagues are members of the RAP committee. Executive Leadership TeamOversees sustainability-related (including climate) strategy and opportunities. Sustainability-related management groups and forumsComprised of representatives from across NAB’s businesses to align and drive progress in NAB’s priority sustainability areas.(1) The Group has established a number of Executive level groups and forums designed to drive enterprise collaboration, alignment and visibility on strategy, innovation, opportunities, execution activities and emerging risks (described below). The chairs of the below groups and forums provide periodic reporting to the Executive Leadership Team (ELT) and Board and have the power to refer matters of significant importance to the Group Chief Executive Officer (CEO), relevant BEAR accountable persons or the ELT.BoardSustainability Council Chair: Les Matheson, Group Chief Operating Officer Remit: NAB’s over-arching strategic direction as it relates to sustainability performance. Considers stakeholder expectations and NAB’s voluntary obligations.Group Climate Governance Forum Chair: Jacqueline Fox, Chief Climate OfficerRemit: NAB’s strategic response to climate change and transition to a low carbon economy.Affordable Housing Council Chair: Cathryn Carver, Executive, Client Coverage Remit: Drives strategy and actions related to NAB’s response to affordable and specialist housing. Includes supporting targeted partnerships and progress.Indigenous Advisory Group(2) Co-Chair: Ann Sherry AO, NAB Non-Executive Director & Tanya Hosch, AFL General Manager of Inclusion and Social Policy Remit: NAB’s formal Indigenous Advisory Group provides strategic guidance on NAB’s engagement with Aboriginal and Torres Strait Islander people and NAB’s Reconciliation Action Plan. It is supported by a management-level RAP committee.Group Credit & Market Risk CommitteeThe Group Credit and Market Risk Committee is an executive level risk management committee which has oversight of certain financial risks and ESG risks (including climate and human rights related risks), and the Group’s environmental compliance and performance. Refer to the Risk Management section for further information on Risk Management committees.The Board Risk & Compliance Committee oversees ESG risks (including climate and human rights-related risks) and the Group’s environmental compliance and performance reported and escalated by management.Board and Board committeesAccountable for ESG Strategy and oversight of ESG matters, including any escalated from Board committees. Board Audit CommitteeBoard People & Remuneration CommitteeBoard Risk & Compliance CommitteeBoard Customer CommitteeBoard Nomination & Governance CommitteeIndependent assurance & advice Policies, systems and processesRisk ManagementStrategy, purpose, values & culture7-504 NFN2651 - Governance Diagrams - Update_1A October 31, 2023 11:19 am
Helping our communities prosper (cont.)
activities may have a higher inherent exposure to ESG-
related risks. It sets out sectors and activities where we
have restricted or no appetite. Key elements of the risk
appetite framework (RAS, CAS and the Sensitive Sectors
and Areas List - refer to Figure 4) are reviewed and
refreshed annually to incorporate emerging and changing
ESG risks, including during 2023.
• Group Policy Governance Framework – prescribes the
minimum requirements for policies across the Group
to support adherence to regulatory and legislative
obligations, our strategic ambition, risk appetite, and
where relevant, industry or best practices. Specific
ESG-related policies include the Group Environmental
Management Policy, Group Environmental Reporting
and Offset Management Policy, Human Rights Policy,
Social Impact Policy, NZBA Policy, Equator Principles
Policy, Assessing Customer-related ESG Risk Policy and
Environmental Contamination Risk Policy. During 2023, the
Equator Principles Policy, Assessing Customer-related ESG
Risk Policy and Environmental Contamination Risk Policy
were refreshed.
Figure 4: Key elements of our risk appetite framework
ESG risk management in lending
The Group considers exposure to risk, including ESG risk, at a
lending portfolio and individual customer level.
The Group’s credit risk assessment and due diligence
processes include the following steps, appropriate to the
relevant sector, business activity and geography:
Origination and internal review
As part of the credit risk assessment and due diligence
process, colleagues in both NAB Business Banking and
Corporate & Institutional Banking Divisions are required
to undertake negative media screening on customers at
origination and internal review.
If potential ESG risk issues are identified as part of this risk-
based screening, or bankers note a customer's involvement
in high-risk sectors or activities, then customers are subject
to more detailed ESG risk assessment and due diligence in
accordance with exposure-related trigger thresholds, as part
of the Group’s origination or ongoing credit review processes.
Evaluation
Detailed credit risk assessment and due diligence is
conducted. This includes assessment and identification of
material risk issues, incorporating ESG risks. ESG-related
checklists and guidance notes on a range of topics and
sensitive sectors help guide this activity. This may include
assessing a potential customer’s background, character, ESG-
related performance and the countries in which they operate.
Where lending is project related, the Equator Principles(1) may
apply. The Equator Principles are a set of guidelines through
which participating banks agree to only finance projects
that are managed by the borrower with responsible business
practices (both environmental and social) and which meet and
comply with the Equator Principles.
In 2023, we reviewed and refreshed our ESG-related guidance,
checklists and processes for Corporate & Institutional Banking
colleagues as part of a refresh of customer-related ESG
risk policies. For BNZ, the ESG guidance has been reviewed
and approved, and will be rolled out in 2024.
(1) The Equator Principles are a set of guidelines through which participating banks throughout the world agree to only finance projects that are managed by the borrower
with responsible business practices (both environmental and social) and which meet and comply with the Equator Principles.
54
National Australia Bank
NFN2643 - Risk Appetite Statement - option 3ApprovalEvaluationDocumentation and settlementMonitoringOrigination and internal review7-492 NFN2639_210x148mm_Risk Diagrams - Credit Risk Assessment_2A_01 September 11, 2023 10:10 am Helping our communities prosper (cont.)
Approval
Lending approval is only given where risk (including ESG
risk where appropriate) has been effectively evaluated,
appropriately mitigated and accepted. Where there is high
ESG or reputational risk, matters are escalated to the relevant
divisional and/or executive forums or committees, Board Risk
& Compliance Committee and/or Board as appropriate.
Documentation and settlement
During documentation and settlement, the customer may
be subject to conditions and covenants to address
legal obligations, any voluntary compliance obligations (for
example, the Equator Principles), and/or to monitor and
manage specified ESG risks against agreed performance
measures. This includes consideration of ESG performance
KPIs when sustainability-linked products are involved.
Customer engagement and monitoring
Ongoing customer relationship management includes
engagement with customers to discuss their ESG-related
performance, issues and initiatives. This engagement helps
us to assess customer's ESG performance and to better
understand their ESG goals and objectives so we can support
them with appropriate products and services and manage
ESG and reputation risk that may arise as a result of the
customer relationship. It also includes regular review of
the customer’s compliance with any agreed conditions and
covenants with ESG-related requirements. If there is evidence
of systemic non-compliance or material issues, this may result
in termination of the relationship.
ESG risk management in sourcing
The conduct and performance of suppliers can have a
significant impact on NAB's sustainability as a business, as
well as our reputation within communities. We have risk
management processes to identify, assess, mitigate and
monitor potential risk areas where we could be exposed to
ESG risks. The Group Supplier Sustainability Principles set out
an expectation that suppliers will, among other things:
• Comply with all relevant local and national laws and
regulations, provide transparent and public reporting on
their ESG risks and have a process in place to provide timely
disclosure to the Group of material ESG matters concerning
their organisation.
• Respect human rights and address any infringements or
adverse impacts to human rights associated with their
business activities.
• Comply with all relevant local and national laws and
regulations in relation to environmental protection,
management and reporting.
In addition, NAB and BNZ have taken action, where applicable,
to reduce the likelihood that we might have an adverse
impact on human rights as a consequence of procurement,
for example by continuing to purchase Fairtrade certified tea,
coffee and cocoa across NAB commercial building tea points
and Fairtrade certified coffee across BNZ commercial building
tea points.
In 2023, NAB reviewed and refreshed the ESG risk assessment
component of its Third-Party Risk Management Module, which
is part of our enterprise risk management tool. This supports
the ongoing management of supplier-related risks, including
ESG risk.
Building ESG risk management capability
We provide frontline colleagues with access to appropriate
ESG expertise, information, training and tools as part of our
approach to managing ESG risk. An ESG module, which in
2023 included information on modern slavery related risks, is
included in annual Risk Awareness training for all colleagues.
In 2023, NAB achieved a participant completion rate of 98.6%
for Risk Awareness training. In 2024, NAB plans to expand the
content and cover general ESG risk, human rights and modern
slavery and climate risk.
During 2023, further capability improvement activities were
completed to continue to embed ESG risk management
practices across the Group, including in relation to climate
change. This included:
• Training sessions on a range of topics including
climate change, net zero banking, Equator Principles,
green and sustainable finance, ESG-related assurance
and greenwashing delivered as part of Corporate and
Institutional Banking sustainability champions network
training program, and refresher training for Corporate
and Institutional Banking and Business and Private Banking
colleagues on our customer-related ESG Risk policies;
• Training sessions on greenwashing for colleagues in a
range of teams including Risk, Corporate Affairs, Marketing,
Corporate and Institutional Banking, and the Climate Office;
Participating in voluntary industry initiatives
The Group has voluntarily become a signatory to initiatives
that help banks set standards and improve ESG risk
management practices. These include the UN Global Compact,
the Equator Principles, the PRB and NZBA. Requirements under
these initiatives are assigned in the Group's enterprise risk
management tool, to ensure we have controls and processes
in place to meet any requirements of these initiatives and to
track the Group's progress in meeting these requirements.
ESG risk management references
This year, the Group has published its second standalone
Climate Report. This contains detailed disclosures aligned
to the recommendations of the Taskforce on Climate-
related Financial Disclosures. This is available on
nab.com.au/annualreports.
The Group's modern slavery statement is provided
on nab.com.au/about us/social-impact/modern-slavery-
statement.
Refer to Risk Factors on page 97 for further detail on the
Group's exposure to Sustainability Risk.
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2023 Annual Report
55
56
National Australia Bank
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationErnst & Young8 Exhibition StreetMelbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent Limited Assurance Report to the Management andDirectors of National Australia Bank LimitedOur ConclusionErnst & Young (‘EY’, ‘we’) were engaged by National Australia Bank Limited (‘NAB’) to undertakelimited assurance as defined by Australian Auditing Standards, hereafter referred to as a ‘review’ overthe Subject Matter defined below for the year ended 30 September 2023. Based on the procedures wehave performed and the evidence we have obtained, nothing has come to our attention that causes usto believe the Subject Matter has not been prepared, in all material respects, in accordance with theCriteria defined below.What Our Review CoveredWe reviewed NAB’s preparation and application of its materiality process for NAB’s ESG materialthemes against the Criteria of the Global Reporting Initiative (GRI) 2023 Standard’s MaterialityPrinciple for defining reporting content, as included in NAB’s 2023 Annual Report (“AR”).We also reviewed the following performance metrics and disclosures for the year ended 30 September2023:What our review covered (Subject Matter)Criteria applied by NAB (Criteria)Annual Report20 key non-financial metrics and the relateddisclosures included throughout the AR4 key non-financial metrics and the relateddisclosures included throughout the AR related toNAB’s Reconciliation Action Plan (“RAP”)Criteria for the key non-financial metricsthroughout the AR with reference to the definedterms in the glossary of NAB’s ARSustainability Data Pack (“SDP”)25 key non-financial metrics and the relateddisclosures included throughout the SDP7 key non-financial, RAP related metrics and therelated disclosures included throughout the SDPCriteria for the key non-financial metricsthroughout the SDPPlease see Appendix A for a breakdown of the key non-financial metrics and related disclosuresassured in the AR and SDP. Other than as described in the preceding paragraphs, which set out thescope of our engagement, we did not perform assurance procedures on the remaining informationincluded in the Report, and accordingly, we do not express an opinion or conclusion on thisinformation. i
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2023 Annual Report
57
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationKey ResponsibilitiesEY’s Responsibility and IndependenceOur responsibility is to express a conclusion on the Subject Matter based on our review.We have complied with the independence and relevant ethical requirements, which are founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. The firm applies Auditing Standard ASQM 1 Quality Management for Firms that Perform Audits or Reviews of Financial Reports and Other Financial Information, or Other Assurance or Related Services Engagements, which requires the firm to design, implement andoperate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.NAB’s ResponsibilityNAB’s management is responsible for selecting the Criteria, and for presenting the materiality process, selected material topics and performance metrics and disclosures in accordance with that Criteria, in all material respects. This responsibility includes establishing and maintaining internal controls, maintaining adequate records and making estimates that are relevant to the preparation of the subject matter, such that it is free from material misstatement, whether due to fraud or error.Our Approach to Conducting the ReviewWe conducted our review in accordance with the Australian Standard for Assurance Engagements Other Than Audits or Reviews of Historical Financial Information (‘ASAE 3000’), the Australian Standard on Review Engagements ASRE 2405 Review of Historical Financial Information Other than a Financial Report and the terms of reference for this engagement as agreed with NAB on 10 August 2023. That standard requires that we plan and perform our engagement to express a conclusion on whether anything has come to our attention that causes us to believe that the Subject Matter is not prepared, in all material respects, in accordance with the Criteria, and to issue a report.
58
National Australia Bank
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationSummary of Review Procedures PerformedA review consists of making enquiries, primarily of persons responsible for preparing the materialityprocess, selected material topics, performance metrics and disclosures, and applying analytical andother review procedures.The nature, timing, and extent of the procedures selected depend on our judgement, including anassessment of the risk of material misstatement, whether due to fraud or error. The procedures weperformed included, but were not limited to:(cid:127)Conducting interviews with NAB personnel and collating evidence to understand NAB’s materialityprocess, process for reporting selected performance metrics as well as risks of misstatement andquality controls to address risks(cid:127)Assessing NAB’s materiality process and conducting checks such as a media review and peerreview to support alignment with the GRI Standards materiality and completeness principles(cid:127)Assessing the AR and SDP for disclosure and coverage of materiality process and identifiedmaterial issues in line with the GRI standards materiality and completeness principles(cid:127)Conducting limited assurance procedures over the performance metrics and disclosures,including:(cid:127)Checking that the calculation Criteria have been applied in accordance with themethodologies for the non-financial metrics(cid:127)Checking the clerical accuracy of input data utilised to calculate selected performancemetrics(cid:127)Undertaking analytical procedures to support the reasonableness of selected performancemetrics(cid:127)Identifying and testing assumptions supporting calculations(cid:127)Performing recalculations of selected performance metrics using input data and, on asample basis, testing underlying source information to support accuracy of selectedperformance metrics(cid:127)Assessing the accuracy and balance of statements associated with the selectedperformance metricsInherent LimitationsProcedures performed in a review engagement vary in nature and timing from, and are less in extentthan for, a reasonable assurance engagement. Consequently, the level of assurance obtained in areview engagement is substantially lower than the assurance that would have been obtained had areasonable assurance engagement been performed. Our procedures were designed to obtain a limitedlevel of assurance on which to base our conclusion and do not provide all the evidence that would berequired to provide a reasonable level of assurance.While we considered the effectiveness of management’s internal controls when determining the natureand extent of our procedures, our assurance engagement was not designed to provide assurance oninternal controls. Our procedures did not include testing controls or performing procedures relating tochecking aggregation or calculation of data within IT systems. i
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2023 Annual Report
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A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Other Matters Our review does not extend to any disclosures or assertions made by NAB relating to future performance plans and/or strategies disclosed in the AR and SDP. Our review extends to disclosures of prior year figures for the metrics set out in Appendix B, with the exception of the metrics set out in the footnote below.1 Use of Our Assurance Statement We disclaim any assumption of responsibility for any reliance on this assurance report to any persons other than management and the Directors of NAB, or for any purpose other than that for which it was prepared. Our review included web-based information that was available via web links as of the date of this statement. We provide no assurance over changes to the content of this web-based information after the date of this assurance statement. Ernst & Young Rebecca Dabbs Partner Melbourne 9 November 2023 1 Total workforce (by contract type and geographic region), Progress against 2021-2025 Inclusion & Diversity measurable objectives female representation during FY23, Gender pay equity, Number of diverse suppliers engaged
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National Australia Bank
A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationAppendix A#YearNon-financial metricsScopeLocation1FY23Number of Code of Conduct breaches (by category and consequence)Australia& NZAR &SDP2FY23Net Promoter Score (by segment)Australia & NZAR & SDP3FY23Total customer complaints (by region and by category–showingpercentage change), including total number of complaints referred bycustomers to ombudsmen/external dispute resolution bodiesAustralia & NZAR & SDP4 FY23 Workforce breakdown by ‘diverse’ segmentGroupSDP5FY23Colleague engagement by 'diverse' segmentGroupAR & SDP6FY23Colleague engagement scoreGroupAR & SDP7FY23Colleague engagement survey response rateGroupSDP8FY23Number of distinct accounts assisted experiencing financial hardshipAustraliaAR & SDP9 FY23 Cure rates for NAB Assist customer accounts (30 days and 90 days)AustraliaAR &SDP10FY23Number and dollar value of microfinance loans writtenAustralia & NZAR & SDP11FY23Total workforce (by FTE, contract type, gender, headcount, age group,employment level, geographic region)GroupAR & SDP12FY23Representation of women in total workforce and by employment levelGroupAR & SDP13FY23Representation of women in Management and Executive ManagementGroupAR & SDP14FY23Totalnumber andrate of employee turnover (voluntary/involuntary) bygenderGroupAR & SDP15FY23Ratio of basic salary, women to men (by employment level and location)GroupSDP16FY23Representation of women on Group Subsidiary BoardsGroupAR & SDP17FY23Progress against 2021-2025 Inclusion & Diversity measurable objectivesfemale representation during FY23GroupAR & SDP18FY23Gender pay equityGroupAR & SDP19FY23Return to work rate following parental leave (by gender)AustraliaAR & SDP20FY23Community Investment (by dollar value, region, category, focus area)GroupAR & SDP21FY23Number of whistleblower disclosures received under the WhistleblowerPolicy (inc. partially or fully substantiated, not substantiated and remainingunder investigation)AustraliaSDP22FY23Number of critical and high priority technology incidentsAustraliaAR & SDP23FY23Progress on affordable and specialist housing financing targetAustraliaAR & SDP24FY23Progress toward target to spend $10million annually with diverse suppliersby 2025 during FY23AustraliaAR & SDP25FY23Number of diverse suppliers engagedAustraliaSDP#YearRAP related non-financial metricsScopeLocation1FY23Progress on indigenous spend in FY23AustraliaAR & SDP2FY23Number of microfinance loans provided to Aboriginal and TorresStraitIslander customers as at 30 September 2023AustraliaAR &SDP3FY23Indigenous employee engagement scoreAustraliaSDP4FY23Number ofinternships provided annually to Indigenous Australians currentlycompleting tertiary studyAustraliaAR &SDP5FY23Number of flexible traineeships provided annually across both school-basedand adult traineesAustraliaAR & SDP6FY23Completion rate of Indigenous trainees on programs (%)AustraliaSDP7FY23Representation of Indigenous employeesAustraliaSDP i
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The following information forms part of the Corporate Governance Statement (Statement) for the purposes of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations: •Information on the Inclusion and Diversity policy and measurable objectives (pages 32 to 35);•Risk management overview (page 88), including Environmental, Social and Governance risk management (page 88)Corporate Governance Statement
This page has been intentionally left blank. Corporate
Governance Framework
This Statement describes NAB’s approach to corporate governance and governance practices.
NAB aims to maintain and promote high standards of corporate governance to support strong business performance and
retain the trust of shareholders, customers, colleagues, regulators and the community. NAB continually strives to improve its
governance, accountability and risk management practices to meet the needs of its business and stakeholders.
NAB's Corporate Governance Framework is based on accountability, delegation and oversight to support sound and
prudent decision-making.
As a fundamental element of NAB’s culture and business practices, its Corporate Governance Framework guides effective
decision-making in all areas of the Group through:
• Strategic and operational planning.
• Culture, purpose, values and conduct.
• Risk management and compliance.
• Customer outcomes.
•
Financial management.
• External reporting.
• People and remuneration.
The following diagram shows the key components of NAB's Corporate Governance Framework. The key functions of the Board and
its committees are outlined in this Statement.
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NAB follows the 4th edition ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations in this
Statement. This Statement has been approved by the Board and is current as at 30 September 2023.
2023 Annual Report
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ShareholdersNAB BoardBoard Audit CommitteeBoard Risk & Compliance CommitteeBoard People & Remuneration CommitteeBoard Customer CommitteeBoard Nomination & Governance CommitteeManagementGroup Chief Executive Officer (CEO) Executive Leadership Team The Board reserves certain powers for itself and delegates certain authority and responsibility for day-to-day management of the Group to the Group CEO (and other people as appropriate). The Group CEO in turn delegates certain authorities and responsibilities to Group Executives. These delegations are regularly reviewed and are consistent with the requirements of the Banking Executive Accountability Regime (BEAR). Regardless of any delegation by the Group CEO, the Group CEO is accountable to the Board for the exercise of delegated power and management’s performance.Strategy and risk managementPurpose, values and cultureIndependent assurance and advicePolicies, systems and processes
Board of Directors
Board of Directors
Details of NAB directors in office at the date of this report,
including each director’s qualifications, experience and other
directorships and interests are below.
The Board acknowledges that directors benefit from being
involved in a broad range of governance roles provided
directors have the capacity to devote sufficient time and
effort to fulfil their NAB responsibilities. The Chair, with the
assistance of the Nomination & Governance Committee, has
determined each director meets this requirement.
Mr Philip Chronican
BCom (Hons), MBA
(Dist),GAICD, SF Fin
Term of office: Chair and independent non-executive
director. Non-executive director since May 2016 and Chair
of the Board and the Board’s Nomination & Governance
Committee since November 2019.
Independent: Yes
Industry experience: Philip has more than 40 years of
experience in banking and financial services in Australia and
New Zealand. Before his retirement from executive roles,
Philip was responsible for leading ANZ’s Australian retail and
commercial banking business. Prior to that, he had a long
career at Westpac, including as the Chief Financial Officer and
leading Westpac’s institutional banking business.
During his career as a banking executive, Philip gained
deep experience in strategy, business performance,
transformation, operations, risk management, capital
management, financial reporting, stakeholder engagement,
and people and culture. He also gained broad experience in
technology, M&A activity and post-merger integration.
Philip has taken an active and public role in advocating for
greater transparency and ethics in banking and promoting
workforce diversity. Philip has also developed his knowledge
and takes a strong interest in climate change and the impact
on customers and the economy.
Other business and market experience: Philip started his
career as an economist and continues to take a deep
interest in domestic and international economics. Through his
executive and non-executive career, Philip has had extensive
experience in governance practices.
Directorships of other listed entities:
Woolworths Group Limited (since October 2021)
Other relevant interests: Philip’s other interests include The
Westmead Institute for Medical Research (Chair) and the
National Foundation for Australia-China Relations Advisory
Board (Member).
64
National Australia Bank
Mr Ross McEwan CBE
BBus
Term of office: Group Chief Executive Officer and Managing
Director since December 2019.
Independent: No
Industry experience: Ross has more than 30 years of
experience in the financial services industry, spanning
banking, insurance and investment. Prior to joining NAB, Ross
was Group CEO of the Royal Bank of Scotland (RBS) from
2013 to 2019. Prior to joining RBS, he held executive roles at
Commonwealth Bank of Australia, First NZ Capital Securities
and National Mutual Life Association of Australasia / AXA New
Zealand. From this experience, Ross brings a strong focus
on customers, business performance, capital management,
technology transformation, risk management, and people and
culture to his current role.
Other business and market experience: Ross has deep
experience in leading organisations through significant
change and recovery.
Other relevant interests: Ross' other interests include
Australian Banking Association (Director) and the Financial
Markets Foundation for Children (Director).
Mr David Armstrong
BBus, FCA, MAICD
Term of office: Independent non-executive director since
August 2014. Chair of the Board's Audit Committee and member
of the Board's Risk & Compliance Committee. David will retire
at NAB's 2023 AGM in December having served three terms of
three years on the Board.
Independent: Yes
Industry experience: David has a deep understanding of
banking and capital markets gained throughout his career in
professional services, particularly auditing banks and other
financial services’ providers. David is deeply experienced
in accounting, auditing, financial and regulatory reporting,
regulation, risk management, capital management and
governance practices.
Other business and market experience: David has more than
30 years of experience in professional services, including
as a partner at PricewaterhouseCoopers (PwC). As well as
a deep understanding of banking, David gained significant
knowledge of real estate and infrastructure industries during
his professional services career, as well as international
experience in North America, Europe and Asia.
Directorships of other listed entities:
IAG Limited (since September 2021)
Other relevant interests: David’s other interests include The
George Institute for Global Health (Chair) and Opera Australia
Capital Fund Limited (Director).
Board of Directors (cont.)
Ms Kathryn Fagg AO
FTSE, BE(Hons), MCom
(Hons)
Term of office: Independent non-executive director since
December 2019. Member of the Board's Risk & Compliance and
People & Remuneration Committees.
Independent: Yes
Industry experience: During her executive career, Kathryn
had first-hand banking experience through operational and
strategic leadership roles at ANZ. She also served on the
Board of the Reserve Bank of Australia.
Other business and market experience: Kathryn has more
than 25 years of senior commercial and operational leadership
experience in a range of industries, holding executive roles
with Linfox Logistics, Bluescope Steel and ANZ.
During her executive career in banking and other industries,
Kathryn gained deep experience in strategy, business
performance, risk management, customer experience,
corporate development, stakeholder engagement, and people
and culture, in a variety of jurisdictions across Asia as well as
in Australia and New Zealand.
Kathryn has had an active non-executive career across
industries including science and innovation, manufacturing,
industrials, macroeconomics and public policy, and the
investment sector. In these roles, Kathryn has developed
strong experience across a broad range of ESG matters.
Directorships of other listed entities:
Djerriwarrh Investments Limited (since May 2014)
Medibank Private Limited (since March 2022)
Former directorships of other listed entities in the past
3 years:
Boral Limited (from September 2014 to July 2021)
Other relevant interests: Kathryn’s other interests include
CSIRO (Chair), Breast Cancer Network Australia (Chair),
Watertrust Australia Limited (Chair), The Grattan Institute
(Director), The Myer Foundation (Director) and Champions of
Change Coalition (Director).
Ms Christine Fellowes
BE, MAICD
Term of office: Independent non-executive director since
June 2023. Member of the Board's Customer Committee.
Christine will stand for election at the 2023 AGM.
Independent: Yes
Industry experience: Christine has more than 30 years of
experience leading businesses across strategy, marketing,
product and brand development, operations and profit and
loss (P&L), driving digital transformation within multinational
organisations in media, communications and technology.
Other business and market experience: Christine has
extensive experience in leading growth businesses across
regional expansion, strategy, operations and P&L roles for
(1) Listed on TSX and NASDAQ.
prominent US multinationals in media, entertainment and
technology companies in Asia-Pacific. Most recently she
served as the Managing Director of the NBCUniversal Global
Networks and Direct to Consumer business in Asia-Pacific,
overseeing Pay-TV, television and digital services, where she
also served on corporate boards. Prior to that, she held
leadership positions at Comcast International Media Group,
Turner Broadcasting System and Omnicom Group.
Christine has a deep understanding of navigating strategic
digital transformation while serving broad customer and
community interests. Her expertise lies in strategy
development, business performance, customer experience,
stakeholder engagement and organisational culture, as well
as high competency in data and analytics.
Former directorships of other listed entities in the past
3 years:
VIQ Solutions(1) (from 2022 to August 2023)
Other relevant interests: Christine co-founded NINEby9 Pte
Ltd, a Singapore based company dedicated to research and
advocacy for gender equality in organisations in Asia. As a
director of the company, she actively works towards fostering
inclusivity and empowering women in the workplace.
Mr Peeyush Gupta AM
BA, MBA, AMP (Harvard)
Term of office: Independent non-executive director since
November 2014. Member of the Board's Audit and Risk &
Compliance Committees. Peeyush will retire at NAB's 2023 AGM
in December having served three terms of three years on
the Board.
Independent: Yes
Industry experience: Peeyush has more than 30 years of
experience in financial services, with a particular focus
on wealth management. Peeyush was a co-founder and
the inaugural CEO of IPAC Securities, a wealth management
firm spanning financial advice and institutional portfolio
management, which was acquired by AXA. During his executive
career, Peeyush gained deep experience in strategy, business
performance, risk management, fiduciary governance and
stakeholder engagement.
Other business and market experience: Peeyush has
significant governance experience as a director on a range
of listed, government, private and public sector boards
throughout his executive and non-executive career.
Directorships of other listed entities:
Link Administration Holdings Limited (Link Group) (since
November 2016)
Charter Hall WALE Limited (since May 2016)
Other relevant interests: Peeyush’s other interests include
Charter Hall Direct Property Management Limited (Chair),
Special Broadcasting Service Corporation (Director), Northern
Territory Aboriginal Investment Corporation (Director),
Chartered Accountants Australia & New Zealand (Director) and
Cancer Council NSW (Director).
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Alison’s experience extends to providing advice in areas
including audit, transaction support, risk management, internal
controls, business processes and regulatory change to a wide
range of industries, including financial services.
Other business and market experience: Alison has worked in
geographically diverse and complex operating environments
and provided advice to industries including energy, mining,
transport and consumer goods, as well as financial services.
Other relevant interests: Alison's other interests include
Business Council of Australia (Director and Chair of
Macroeconomic Committee) and Australian National University
(Council Member and Chair of Audit and Risk Committee).
Ms Anne Loveridge AM
BA (Hons), FCA, GAICD
Term of office: Independent non-executive director since
December 2015. Chair of the Board's People & Remuneration
Committee and member of the Board's Nomination &
Governance and Customer Committees.
Independent: Yes
Industry experience: Anne has a strong understanding
of banking and financial services, including in the areas
of financial and regulatory reporting, accounting, risk
management, change management and governance, gained
throughout her career as an audit partner, consultant and
non-executive director in this sector.
Other business and market experience: Anne has more than
30 years of experience in professional services, including as
Deputy Chair at PwC. During her career as a senior executive
and partner, Anne gained deep experience in business
performance, client experience, stakeholder engagement,
governance, and people and culture. This included a
particular focus on business growth and change management,
leadership development and succession, performance and
reward frameworks and promoting increased diversity.
Directorships of other listed entities:
nib Holdings Limited (since February 2017)
Platinum Asset Management Limited (since September 2016)
Other relevant interests: Anne’s other interests include
Destination NSW (Board Member).
Board of Directors (cont.)
Ms Carolyn Kay
LLB, BA, GradDip
Management, FAICD
Term of office: Independent non-executive director since July
2023. Member of the Board's Risk & Compliance Committee.
Carolyn will stand for election at the 2023 AGM.
Independent: Yes
Industry experience: Carolyn has more than 30 years’
experience in the financial services sector in executive and
non-executive roles. Carolyn was a lawyer and banker whose
work history included Morgan Stanley, JP Morgan and Linklaters
& Paines in London, New York and Australia. She has held
a number of industry related non-executive director roles
including Commonwealth Bank of Australia, The Future Fund,
Treasury Corporation of Victoria, Victorian Funds Management
Corporation and Colonial State Bank.
Other business and market experience: Carolyn has been
and remains a non-executive director of enterprises across
a broad range of industries. She was previously a Guardian
of Australia’s sovereign fund, The Future Fund (2015 to 2023)
and a panel member of the Commonwealth Retirement Income
Review (2019 to 2020). In the public sector, Carolyn is a member
of the Foreign Investment Review Board and in the not-for-
profit sector, she is on the board of the General Sir John
Monash Foundation and Sydney Grammar School.
During her executive and non-executive careers,
Carolyn gained deep experience in banking, governance,
risk management, business performance, stakeholder
engagement, people and culture, and public policy.
Carolyn was awarded a Centenary Medal for services to
Australian society in business leadership.
Directorships of other listed entities:
Scentre Group Limited (since February 2016)
Other relevant interests: Carolyn's other interests include
Rothschild & Co Australia (Chair), Myer Family Investments
(Director), Foreign Investment Review Board (Member), General
Sir John Monash Foundation (Director) and Sydney Grammar
School (Trustee).
Ms Alison Kitchen
BA (Hons), FCA, MAICD
Term of office: Independent non-executive director since
September 2023. Member of the Board's Audit Committee.
Alison will stand for election at the 2023 AGM.
Independent: Yes
Industry experience: Alison has more than 30 years’
experience in a variety of management and governance roles
within the KPMG partnership, as well as serving as lead external
audit partner for a range of ASX-listed organisations, including
five ASX Top 50 companies with global operations. Alison was
the National Chair of KPMG Australia and a member of KPMG’s
Global and Regional boards having responsibility for the overall
governance and strategic positioning of the firm.
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National Australia Bank
Board of Directors (cont.)
Mr Douglas McKay ONZM
BA, AMP (Harvard) CMinstD
(NZ)
Term of office: Independent non-executive director since
February 2016. Member of the Board's Audit and Customer
Committees. Chair and independent non-executive director of
BNZ, a major subsidiary of NAB.
Independent: Yes
Industry experience: Doug has gained industry experience
as Chair of BNZ since 2016 (and non-executive director since
2013). This has supplemented Doug’s extensive experience in
business performance, capital management, risk management
and stakeholder engagement with banking context.
Other business and market experience: Doug has more
than 30 years of experience in commercial and leadership
roles in manufacturing and distribution businesses across
Australasia having held CEO and Managing Director positions
in major trans-Tasman companies including Lion Nathan,
Carter Holt Harvey, Goodman Fielder, Sealord and Independent
Liquor. He was the inaugural CEO of the amalgamated Auckland
Council. During his executive career, Doug gained deep
commercial, business performance, customer, marketing, risk
management and stakeholder engagement experience. Doug
has private equity experience and a deep understanding of
New Zealand and Australian markets.
Directorships of other listed entities:
Fletcher Building Limited(1)(since September 2018)
Vector Limited (since September 2022, Chair since
September 2023)
Former directorships of other listed entities in the past
3 years:
matters, client experience, stakeholder engagement, and
people and culture.
Other business and market experience: Simon has broad
experience from a range of governance roles in private, public
and social sectors. This includes experience gained as former
Chair of MYOB Limited, CSIRO, MS Research Australia and a
Federal Government Panel that completed a strategic review
of health and medical research in 2013.
Simon is an active philanthropist and has contributed over
many years to charitable, educational, public health, social
housing and other community-based organisations and
social causes.
Simon has a strong interest in ESG matters, gained through
his broad range of roles and experiences. Simon is the Chair
of the Australian Industry Energy Transitions Initiative and was
the inaugural President of the Australian Takeovers Panel and
the Banking and Finance Oath’s Review Panel.
Directorships of other listed entities:
Rio Tinto Group (since January 2019)
Other relevant interests: Simon’s other interests include
Monash University (Chancellor), Greater South East Melbourne
(Chair), The Big Issue (Advisory Board Member) and GFG Alliance
Australia (Advisory Board Member).
Ms Ann Sherry AO
BA, Grad Dip IR, FAICD, FIPAA
Term of office: Independent non-executive director since
November 2017. Chair of the Board's Customer Committee and
member of the Board's People & Remuneration Committee.
Co-Chair of NAB's Indigenous Advisory Group.
Ann will stand for re-election at the 2023 AGM.
Genesis Energy Limited(1) (from June 2014 to September 2022)
Independent: Yes
Other relevant interests: Doug is a Director of IAG (NZ)
Holdings Limited.
Mr Simon McKeon AO
BCom, LLB, FAICD
Term of office: Independent non-executive director since
February 2020. Chair of the Board’s Risk & Compliance
Committee and member of the Board's Nomination &
Governance Committee.
Simon will stand for re-election at the 2023 AGM.
Independent: Yes
Industry experience: Simon has more than 40 years of
experience in a wide range of sectors including financial
services, law, government and charities. During his executive
career, he held investment banking leadership roles within
Macquarie Group, including as Executive Chair of its business
in Victoria. In his non-executive career, Simon served as
AMP Limited Chair (2014-2016) (and non-executive director
2013-2016). Through these roles in the financial services
industry, Simon has gained deep experience in strategy,
business performance, risk management, legal and regulatory
(1) Dual-listed on the New Zealand and Australian stock exchanges.
Industry experience: Ann had a 12 year banking career at
Westpac in senior business and people and culture leadership
roles, including as divisional CEO for Westpac New Zealand and
Bank of Melbourne, and Group Executive, People & Culture. In
these roles, Ann gained deep experience in strategy, business
performance, operations, risk management, customer
experience, stakeholder engagement, and people and culture,
with a strong focus on diversity and inclusion. She also gained
broad experience in technology, capital management and
marketing. Ann also served as a director on the ING Group
Supervisory Board and as a director of ING DIRECT Australia.
Other business and market experience: Ann has significant
experience in executive roles within the tourism and transport
industries in Australia and New Zealand, as well as in
government and public service. She served as CEO and Chair
of Carnival Australia, the largest cruise ship operator in
Australasia and the South Pacific. Earlier in her career, Ann was
First Assistant Secretary of the Office of the Status of Women
advising the Prime Minister on policies and programmes to
improve the status of women.
Ann is an active philanthropist and has contributed over many
years to charitable and social causes. Ann has a deep interest
in ESG matters, with particular interests and experience in
diversity and Indigenous matters.
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Board of Directors (cont.)
Directorships of other listed entities:
Enero Group Limited (Chair since January 2020)
Former directorships of other listed entities in the past
3 years:
Sydney Airport (from May 2014 to March 2022)
Other relevant interests: Ann’s other interests include
Queensland University of Technology (Chancellor), UNICEF
Australia (Chair), Port of Townsville (Chair) and Queensland
Airports Limited (Chair).
Company Secretaries
The Group Company Secretary provides advice and support
to the Board, and is accountable to the Board, through the
Chair, for all matters relating to the proper functioning of the
Board and its committees. The Group Company Secretary is
responsible for advising the Board on governance matters
and ensuring compliance with Board and Board committee
charters and procedures.
The Group Company Secretary (and assistant company
secretaries) are appointed and removed by the Board.
Details of company secretaries of NAB in office at the date of
this report and each company secretary’s qualifications and
experience are below.
Louise Thomson BBus (Dist), FGIA joined the Group in 2000 and
was appointed Group Company Secretary in May 2013. Louise
is Secretary to the Board and the Nomination & Governance
Committee. She has experience in a wide range of finance,
risk, regulatory and governance matters.
Penelope MacRae BA (Hons), LLB (Hons) joined the Group
in 2011 as a Senior Corporate Lawyer and was appointed
Company Secretary in December 2016. Penny is the Secretary
of the Board's Risk & Compliance Committee and is responsible
for managing the Group's Executive-level Risk Committees.
She has experience in a wide range of corporate, legal,
governance, risk and regulatory matters.
Tricia Conte BCom, LLB (Hons) joined the Group in 2006 and
was appointed Company Secretary in November 2018. Tricia is
the Secretary to the Board Audit Committee. She is a Special
Counsel in the Legal team and advises the Group on a wide
range of legal, corporate, governance and regulatory matters.
Ricardo Vasquez BSc, LLB, ACIS joined the Group in 2020 and
was appointed Company Secretary in March 2021. Mr Vasquez
resigned as Company Secretary in July 2023.
68
National Australia Bank
Executive Leadership Team
Executive Leadership Team
Details of NAB's Executive Leadership Team members in office at the date of this report are below.
Ross McEwan CBE
BBus
Nathan Goonan
BCom, BAgrSc (Hons)
Refer to the Board of Directors on page 64 for Ross
McEwan's biography.
Nathan Goonan was appointed as Group Chief Financial Officer
in July 2023. Nathan joined NAB in 2004 before working in
investment banking. Since re-joining NAB in 2013, Nathan has
held several executive-level roles in corporate strategy and
mergers and acquisitions, including Group Executive Strategy
and Innovation.
Sharon Cook
BA, LLB (Hons)
Sharon Cook was appointed Group Executive, Legal and
Commercial Services in April 2017. She is responsible for Legal,
Governance, Regulatory Affairs, Customer Complaints, the
Office of the Customer Advocate and Customer Remediation
at NAB. Sharon has more than 30 years of experience as a
lawyer. For over 8 years before joining NAB, Sharon led major
commercial law firms.
Shaun Dooley
BEc, MS
Shaun Dooley was appointed Group Chief Risk Officer in
October 2018. Prior to his current role, Shaun was Group
Treasurer and he has also led the Institutional Banking,
Corporate Finance and Financial Institutions teams. Shaun
joined NAB in 1992 as a relationship banker in the Corporate
Banking group. Prior to joining NAB, Shaun worked for Chase
Manhattan Bank Australia and Elders Finance Group.
Daniel Huggins
BCom (Hons), MBA, MEM
Daniel Huggins was appointed as BNZ Managing Director and
Chief Executive Officer in October 2021. Daniel has 17 years of
experience in banking, corporate and financial services. Since
joining BNZ in 2020, Daniel held an executive-level role focused
on customer, products and services. Prior to joining BNZ,
Daniel worked at the Commonwealth Bank of Australia and
McKinsey & Company.
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Andrew Irvine
BSc Business Management
(Hons), MBA
Andrew Irvine was appointed as Group Executive, Business and
Private Banking in September 2020. Andrew has 15 years of
experience in customer solutions and business banking. Prior
to joining NAB, he worked at Bank of Montreal where he was
Head of Canadian Business Banking.
David Gall
BSc, BBus, MBA (Exec)
David Gall was appointed Group Executive, Corporate and
Institutional Banking in October 2018. David has over 30 years
of experience in corporate, business and retail banking,
working capital services, risk and payments. Since joining NAB
in 2008, David has held executive roles in Corporate Banking
and Specialised Business, Global Transaction Banking and
Payments, and as Group Chief Risk Officer. Prior to joining NAB,
David was a Group Executive of Strategy and Retail Business
at St George Bank. David is a Senior Fellow of the Financial
Services Institute of Australasia (FINSIA).
Les Matheson
BCom (Hons)
Les Matheson was appointed as Group Chief Operating Officer
in January 2021 and was appointed Group Executive, Digital,
Data and Chief Operating Officer with effect from 1 November
2023. Les has 26 years of experience in banking and finance
across Europe and Asia Pacific. Prior to joining NAB, he was
CEO of the Retail Bank at RBS and was also responsible for
Ulster Bank in Ireland. Les had a long career with Citigroup,
including Chief Country Officer for Australia. He is a Certified
Bank Director (The Institute of Bankers UK) and a Fellow of the
Chartered Bankers Institute (UK).
2023 Annual Report
69
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Executive Leadership Team (cont.)
Rachel Slade
BEc (Hons)
Rachel Slade was appointed as Group Executive, Personal
Banking in April 2020. Rachel has over 20 years of experience
in banking. Since joining NAB in 2017, Rachel has held
several executive-level roles in deposits and transaction
services, and customer experience, and joined the Executive
Leadership Team in October 2018. Prior to joining NAB, she
held several executive-level positions at Westpac, including in
Global Transactional Services and in the Retail and Business
divisions. Rachel is a graduate of the Women’s Leadership
program at Harvard Business School.
Sarah White
Sarah White was appointed as Group Executive, People &
Culture in August 2023. Sarah joined the NAB Executive
Leadership Team after more than five years as Chief of
Staff to the Group Chief Executive Officer. Prior to that
she was Executive General Manager, Talent and Leadership,
in addition to a number of other key executive roles in
People & Culture. Sarah has extensive experience in business
partnering, coaching executives and senior leaders, leading
complex change and business transformation.
Patrick Wright
BBA, BMIS
Patrick was appointed to the role of Group Executive,
Technology and Enterprise Operations in April 2017. Prior to
joining NAB, Patrick was Chief Operations and Technology
Officer at Barclaycard and Chief Operations Officer at Barclays
Americas. Patrick has more than 30 years of experience in
the banking and technology sectors, giving him extensive
experience in driving major transformations in large financial
services companies.
Former Executive Leadership Team members
Three Executive Leadership Team members retired in the
period between 30 September 2023 and the date of this
report. They are reported as Key Management Personnel for
2023 in the Remuneration Report.
Susan Ferrier
BA, LLB, MBA
Susan Ferrier was Group Executive, People and Culture
from October 2019 to August 2023. Susan has over 30
years of international experience in culture and people
strategy across financial services, professional services and
technology sectors. Prior to joining NAB, Susan was Global
Head of People at KPMG responsible for the global talent
strategy and leading teams in Global HR, Global Learning
and Development, Global Citizenship and Global Inclusion and
Diversity. Susan announced her retirement from the Group in
July 2023, effective from 31 October 2023.
Gary Lennon
BEc (Hons)
Gary Lennon was Group Chief Financial Officer from March 2016
to June 2023 and was previously Executive General Manager,
Finance and Chief Financial Officer Wholesale Banking. Prior
to joining NAB in 2008, Gary spent a combined 18 years in a
number of global senior finance executive roles with Deutsche
Bank and KPMG. Gary is a Fellow of the Institute of Chartered
Accountants. Gary announced his retirement from the Group
in March 2023, effective from 1 October 2023.
Angela Mentis
BBus
Angela Mentis was Group Chief Digital, Data and Analytics
Officer from October 2021 to October 2023. Angela has over
30 years of banking experience, including as the Managing
Director and Chief Executive Officer of BNZ. Angela has also
served as NAB’s Chief Customer Officer – Business and Private
Banking, and as Group Executive, Business Banking. Angela
has held senior positions at BT Financial Group, Westpac and
Citibank Limited, after starting at Macquarie Bank. She is a
Senior Fellow of FINSIA. Angela announced her retirement from
the Group in October 2023, effective from 1 November 2023.
70
National Australia Bank
Board roles and responsibilities
The Board guides the strategic direction of NAB and represents shareholders’ interests by overseeing activities that create
sustainable value.
The roles and responsibilities of the Board, including the matters that are specifically reserved to the Board and those delegated
to management, are set out in the Board Charter which is available in the Corporate Governance section at nab.com.au/about-
us/corporate-governance. Key elements of the Board’s roles and responsibilities are described below.
The Board Charter sets out the specific responsibilities of the Chair. The Chair’s primary responsibility is to lead the Board and
oversee the processes used by the Board in performing it's role.
The Board delegates certain powers to Board committees to help it fulfil its roles and responsibilities. Committee roles and
responsibilities are set out in the respective charters and Board Committee Operating Rules, which are also available in the
Corporate Governance section at nab.com.au/about-us/corporate-governance.
The Board has delegated management of the Company to the Group CEO. Except for any specific powers reserved by the Board,
or matters specifically delegated by the Board to others, the Group CEO may make all decisions and take any necessary action
to carry out the management of the Group. The Group CEO is accountable to the Board in exercising this delegated authority. The
Board Charter also sets out the responsibilities of the Group CEO.
Key element
Board's roles and responsibilities
Leadership and
stakeholder focus
•
•
Represent shareholders and serve the interests of the Company by overseeing and evaluating the Company’s
strategies, performance, frameworks and policies.
Ensure that stakeholders are kept informed of the Company’s performance and major developments affecting
its state of affairs.
• Approve the Company’s purpose, values and Code of Conduct to underpin the desired culture within
the Company and oversee that the Company’s culture is focused on sound risk management and
customer outcomes.
• Oversee that an appropriate framework exists for relevant information to be reported by management to the
Board and whenever required challenge management and hold it to account.
• With the guidance of the Customer Committee, oversee the importance given to the voice of the customer and
the focus on customer outcomes.
Strategy
and performance
• Guide the strategic direction of the Company and monitor the execution of strategies and business
performance to oversee that sustainable value is being built for shareholders. This includes business
unit strategies and strategies for critical enablers such as technology, digital, data and analytics, and
human capital.
• Make decisions concerning capital structure and dividend policy.
• Approve major capital expenditure and other major business initiatives.
External reporting
• With the guidance of the Audit Committee, review and approve the Group's annual and half yearly financial
statements, other sections of the Annual Report and any reports that accompany them, including the
Climate Report.
• With the guidance of the Audit Committee, review management processes aimed at ensuring the integrity of
financial, regulatory and other corporate reporting.
Risk management
• With the guidance of the Risk & Compliance Committee, satisfy itself that the Group has in place an appropriate
Risk Management Framework for financial and non-financial risks by overseeing related frameworks and
internal compliance and control systems. This includes risk management related to financial crime, technology,
information security, cyber resilience and sustainability, including environmental and human rights risks.
Remuneration
• With the guidance of the People & Remuneration Committee, review and approve the Group’s remuneration
framework including remuneration policy and satisfy itself that the remuneration framework and outcomes are
aligned with the Company’s purpose, values, strategic objectives and risk appetite.
Appointment and
succession
planning
• Appoint a Group CEO and Managing Director and approve key executive appointments.
• Monitor and review executive succession planning.
• With the guidance of the Nomination & Governance Committee, plan for Board renewal, appoint non-executive
directors to the Board and select a Chair.
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2023 Annual Report
71
Key Board activities
Key Board activities in 2023
• Strategy and business performance – The Board remains focused on creating sustainable shareholder value. At each major
Board meeting, the Board received reports on business performance and execution of the Group’s strategy to monitor
progress. The Board periodically received reports on execution of strategies at a business unit level to understand operating
context, as well as specific strategic initiatives, such as business acquisitions and integration, digital, data and analytics and
technology plans. The Board also reviewed and approved the Group’s corporate plan, after having several sessions with
management on strategy development.
• Technology - The Board remains focused on technology as a critical enabler of NAB’s business. At each major Board
meeting, the Board received reports from the Group Executive, Technology & Enterprise Operations, as well as updates on
the execution of NAB’s technology strategy. The Board undertook a study tour focused on core banking modernisation,
payments, cyber security and innovation, and participated in workshops with external experts and management on a
range of technology-related topics, including cyber resilience, information security, external technology developments, data
fundamentals and generative AI.
• Financial and capital management – The Board remains focused on business momentum, supporting customers and driving
growth, which requires prudent balance sheet and capital management. The Board received regular reports on financial
performance, capital, funding and liquidity. The Board approved the 2022 full year and 2023 half year financial reports,
the 2022 final and 2023 interim dividends, the capital management strategy and on-market buy-back programs. The Board
also participated in workshops on capital adequacy and stress testing, balance sheet risk management, capital and credit
provisioning and discussed lessons from bank failures in other geographies.
• Risk management – The Board remains focused on risk management, governance, accountability and culture. This focus
requires strong risk governance and an effective Risk Management Framework operated by management. The Board received
regular reports from the Group Chief Risk Officer on financial and non-financial risks, including emerging risks and issues,
and from the Group Money Laundering Reporting Officer on financial crime risk. The Board approved the risk management
strategy, the risk appetite statement and policies for managing financial and non-financial risks. The management of financial
crime risks, cyber and technology risks, and environmental and social risks were areas of focus, as well as emerging risks
related to the economic and geopolitical environment and climate vulnerability.
• People and culture – The Board remains focused on engaged, capable colleagues who are aligned to the Group’s values,
purpose and strategy. The Board received regular reports from the Group Executive, People and Culture on people-related
matters, including progress in the execution of the colleague strategy and achieving NAB’s target culture, and health, safety
and wellbeing. The Board held workshops on leadership and succession planning and met with a range of senior leaders
in formal and informal settings. The Board approved scorecards and performance outcomes for the Group CEO, Group
Executives and certain other senior executives. The Board also approved the Group Performance Indicators used for the
Group Variable Reward Plan and determined the final outcome.
• Customers – The Board and directors met with customers and customer advocates (internal and external) throughout the
year to hear their feedback and perspectives. The Board also focused on matters impacting customers, including customer
vulnerability, scams, servicing experience, cyber risks, integration of acquisitions, digital customer experience, product
governance, compliance with product and conduct obligations and customer remediation. The Board met with the Australian
Financial Complaints Authority to obtain feedback and share perspectives on priorities and industry risks and issues.
• Environmental and social – The Board debated and reviewed the Group’s decarbonisation targets to meet NAB's Net Zero
Banking Alliance commitment, after investing time in education on climate change transition. The Chair and Group CEO met
customers to hear about their approach to climate transition. The Board also met with external experts to deepen the
Board’s understanding of Indigenous affairs, including NAB's Reconciliation Action Plan and the Voice to Parliament. The Board
discussed human rights issues, approved the Modern Slavery Statement and received updates on the Group’s social impact
program and NAB Foundation.
• Regulatory and stakeholder engagement – The Board remains focused on maintaining solid relationships with regulators and
other stakeholders. The Board received regular reports on regulatory engagement, government engagement, key legal and
regulatory matters, and trust and reputation. The Board met with the Group’s main regulators throughout the year to obtain
feedback and share perspectives on priorities, industry risks and issues, and reform. The Group's Enforceable Undertaking
with AUSTRAC was a key area of focus.
72
National Australia Bank
Key Board activities (cont.)
Board meetings
Board meetings are an essential part of corporate governance at NAB. They are the main way for the Board to have oversight
of the Group’s strategy and performance and allow the Board to set expectations of management. The Board approves its
calendar of meetings two years in advance to ensure that directors can attend meetings. The Board has six major multi-day
meetings each year, which include committee meetings and strategy sessions, as well as other minor meetings during the year
for specific purposes. Out-of-cycle Board meetings are convened as needed for time-critical matters.
The Board’s priorities and responsibilities drive comprehensive planning and agenda-setting for meetings. The agenda
forward planner is set at the start of the year and regularly updated to reflect priorities. The forward planner is the key
framework for Board reporting and is used to balance time allocated to strategic and business topics, as well as regulatory
and legal obligations. Recurring agenda items include business performance, strategy execution and development, capital
management, financial reporting, risk management, people and culture, regulatory and other stakeholder engagement and ESG
matters. Unstructured time is also factored into Board meetings and there is flexibility for ad hoc matters to be raised. Meetings
with NAB’s main regulators are also planned at the start of the year. Agendas are reviewed by the Chair, in consultation with the
Group CEO. The same approach is adopted for forward planning and agenda-setting for each of the Board’s Committees, which
are reviewed by respective Chairs in consultation with the relevant Group Executive.
Attendance at meetings
Details of director attendance at Board and committee meetings in 2023 are set out below.
All directors receive copies of agendas, papers and minutes of committee meetings to help ensure they have equal access
to that information regardless of whether they are appointed to a particular committee. All directors may attend committee
meetings even if they are not a member of a committee. The table below excludes the attendance of directors at committee
meetings where they were not a committee member.
Board
meetings(1)(2)
Attended /
Held
Audit
Committee
meetings
Attended /
Held
Risk &
Compliance
Committee
meetings
Attended /
Held
People &
Remuneration
Committee
meetings
Attended /
Held
Customer
Committee
meetings
Attended /
Held
Nomination &
Governance
Committee
meetings
Attended /
Held
Current directors
Phil Chronican
Ross McEwan
David Armstrong
Kathryn Fagg(3)
Christine Fellowes(4)
Peeyush Gupta(3)
Carolyn Kay(5)
Alison Kitchen(6)
Anne Loveridge(7)
Doug McKay
Simon McKeon
Ann Sherry
10/10
10/10
10/10
10/10
3/3
10/10
2/2
-
10/10
10/10
10/10
10/10
-
-
5/5
2/2
-
3/3
-
-
-
5/5
-
-
-
-
6/6
6/6
6/6
2/2
-
-
-
6/6
-
-
-
-
6/6
-
2/2
-
-
7/8
-
-
8/8
-
-
-
-
2/2
-
-
-
5/5
5/5
-
5/5
6/6
-
-
-
-
-
-
-
6/6
-
6/6
-
(1) There were six major Board meetings and four minor Board meetings scheduled in the Board’s calendar for 2023. No Board meetings were convened outside of the
scheduled Board calendar.
(2) Several workshops were held for the Board and Committees during 2023. As these were held as part of a scheduled Board program, workshops are not shown as
additional meetings in the table above.
(3) Ms Fagg and Mr Gupta switched their Audit Committee and People & Remuneration Committee memberships in March 2023 and attended all meetings of those
Committees while a member.
(4) Ms Fellowes joined the Board on 5 June 2023 and attended all Board and relevant Committee meetings held after that date.
(5) Ms Kay joined the Board on 31 July 2023 and attended all Board and relevant Committee meetings held after that date.
(6) Ms Kitchen joined the Board on 27 September 2023. No Board or relevant Committee meetings were held between that date and 30 September 2023.
(7) Ms Loveridge attended all People & Remuneration Committee meetings scheduled in the Board's calendar for 2023. She was unable to attend one out-of-cycle
Committee meeting convened at short notice. The Board Chair attended the Committee meeting on her behalf.
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2023 Annual Report
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Board composition, diversity
and performance
Board composition
Composition of the Board is informed by a number of factors, including the following key principles:
• The Board will be of an appropriate size to allow efficient decision making.
• The Board must consist of a majority of independent non-executive directors.
• The Board should consist of directors with a broad range of skills, experience and expertise, and different facets of diversity,
including gender.
• The Chair must be an independent non-executive director and must not have been a NAB executive or the Group CEO in the
previous three years.
Further detail about directors’ independence is on page 77.
NAB has a Group Fit and Proper and BEAR Suitability Policy that addresses the requirements of APRA Prudential Standard CPS 520
Fit and Proper and supports compliance with the obligations of the BEAR.
This Policy requires an annual assessment of the directors, certain members of senior management and responsible auditors,
including a determination of whether they have the appropriate competence, character, diligence, honesty, integrity and
judgement to perform their role.
The Board, with the assistance of the Nomination & Governance Committee, has reviewed and taken into consideration the
existing workload of directors and concluded that each director has sufficient capacity to undertake the duties expected of a
director of NAB.
As a Board vacancy approaches, the Nomination & Governance Committee assesses the skills and experience required, which
informs the identification of suitable candidates. The most suitable candidate is appointed by the Board after appropriate
checks are undertaken, including assessment in accordance with the Group Fit and Proper and BEAR Suitability Policy, and is
subject to election by shareholders at the next AGM.
The key terms and conditions of a director’s appointment are formally documented in a letter of appointment. This process was
followed for all directors on the Board.
Newly appointed directors must stand for election by shareholders at the next AGM. In addition, the NAB Constitution requires
that at each AGM, non-executive directors who have held office for at least three years without re-election, or beyond the
third AGM following their appointment or last election (whichever is longer) must retire from office and are eligible to stand
for re-election.
Before each AGM, the Board assesses the performance of each director due to stand for election or re-election and decides
whether to recommend to shareholders that they vote in favour of the election or re-election of each relevant director. Further
detail on NAB’s directors is provided on pages 64 to 68.
Board renewal
During the year, after consulting with the Board, the Nomination & Governance Committee reviewed the three-year Board
renewal strategy and plans. This included reviewing the highest priority skills to bring on to the Board over the short and
medium-term, considering a current vacancy and anticipated retirements at the end of 2023. The three highest priority areas
of deep competency for future director appointments were: transformation, digital, technology, data and analytics; banking; and
financial reporting and accounting. The Nomination & Governance Committee and the Board aim to identify, select and nominate
candidates who are able to contribute broadly in the boardroom, not only in areas of deep competency, and who add different
facets of diversity to the Board.
Working with an external recruitment consultant, the Nomination & Governance Committee reviewed candidate profiles and met
with candidates. During 2023, the Nomination & Governance Committee nominated three candidates to the Board, and the Board
appointed Christine Fellowes, Carolyn Kay and Alison Kitchen as non-executive directors. The three new directors will stand for
election by shareholders at the next AGM, as required under NAB’s Constitution. Further detail on NAB’s directors is provided on
pages 64 to 68.
Two directors, David Armstrong and Peeyush Gupta, will stand down from the Board following the 2023 AGM, having completed
three terms of three years.
Re-election and election of directors in 2023
In 2023, the Board has recommended in the AGM Notice of Meeting that shareholders re-elect Simon McKeon for his second
three-year term on the Board and Ann Sherry for her third term. The Board has also recommended that shareholders elect
Christine Fellowes, Carolyn Kay and Alison Kitchen to the Board for their first three-year terms. The Board has provided
shareholders with all material information that is relevant to a decision whether or not to re-elect and elect those directors
in the AGM Notice of Meeting. Further detail on NAB's directors is provided on pages 64 to 68.
74
National Australia Bank
Board composition, diversity and performance (cont.)
Skills matrix
Each year NAB assesses the skills and experience of each director and combined capabilities of the Board. The insights from this
assessment are documented in a skills matrix that is:
• Considered in the context of NAB’s business and its strategic needs.
•
Incorporated into Board succession planning and the selection of new directors.
• Used to inform areas of focus for the Board’s continuing education and use of external expertise.
To prepare the skills matrix, each director rates their skills, expertise and experience against several competency areas that are
then mapped to the skills matrix. The self-assessment ratings and skills matrix are reviewed and calibrated by the Nomination &
Governance Committee on behalf of the Board.
The skills matrix presented here demonstrates alignment of the Board’s responsibilities with the current mix of skills on
the Board.
With the addition of new directors in 2023, the Board believes the current mix of skills, experience and expertise of directors
(as shown on the skills matrix) provides a diverse range of views and perspectives for the effective governance, oversight and
strategic leadership of NAB. The Board also invested in continuing education throughout 2023 to continue to develop directors’
competencies in the following key areas:
• Digital and technology topics – Cyber resilience; information security; core banking modernisation; data foundations; digital
assets; generative AI; and innovation in payments and cyber security technologies. This included a Board study tour and
meeting with external experts on these topics.
• Environmental and social topics – Climate transition (risks, opportunities, transition opportunities, target setting
methodologies and practices) and Indigenous matters. This included meeting with external experts on these topics.
• Risk management in banking – balance sheet risk management; capital adequacy and stress testing; capital and
credit impairment provisioning; lessons from bank failures in other geographies; financial crime risk management; crisis
management; cyber resilience; information security; and BEAR scenarios.
• People-related topics – Succession planning; health and safety; and concepts from NAB’s Distinctive Leadership Program.
• Stakeholders – Investor, customer, regulatory and government perspectives. This included meetings with representatives
from each of these areas to hear and discuss their perspectives.
Skills and experience
Explanation
Collective
Banking and financial
services experience
Leadership and
commercial acumen
Financial acumen
Experience outside NAB in significant components of the financial
services industry, including banking and equity and debt capital
markets. Strong knowledge of the regulatory environment. Includes
advisory roles to the industry.
Skills gained while performing at a senior executive level for a
considerable length of time. Includes delivering superior results,
running complex businesses, leading complex projects and issues,
and leading workplace culture.
Good understanding of financial statements and drivers of financial
performance for a business of significant size, including ability to
assess the effectiveness of financial controls.
Moderate
Strong
Very Strong
Moderate
Strong
Very Strong
Moderate
Strong
Very Strong
Customer outcomes
Experience in delivering customer outcomes and deepening
relationships in customer segments.
Moderate
Strong
Very Strong
Risk management
Strategy
Governance
Digital
and technology
People
and remuneration
Experience in anticipating and evaluating financial and non-financial
risks that could impact the business. Recognising and managing
these risks by developing sound risk management frameworks and
providing oversight. Includes experience in managing compliance
risks and regulatory relationships, as well as an understanding of
cyber resilience and technology risks.
Experience in developing, setting and executing strategic direction.
Experience in driving growth and transformation and executing
against a clear strategy.
Publicly listed company experience, extensive experience in and
commitment to the highest standards of governance, experience in
the establishment and oversight of governance frameworks, policies
and processes.
Experience in oversight of technology for businesses of a significant
scale and implementing business transformations through the use
of technology, including digital, data and analytics, and innovation.
Experience in building workforce capability, setting a remuneration
framework that attracts and retains a high calibre of executives, and
promotion of diversity and inclusion.
Moderate
Strong
Very Strong
Moderate
Strong
Very Strong
Moderate
Strong
Very Strong
Moderate
Strong
Very Strong
Moderate
Strong
Very Strong
Environmental
and social
Understanding potential risks and opportunities from an
environmental and social perspective.
Moderate
Strong
Very Strong
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Board composition, diversity and performance (cont.)
Board tenure and gender statistics(1)
Board tenure
0-3 years
3-6 years
6-9 years
Board gender diversity
Female
Male
%
27.0
27.0
46.0
%
54.5
45.5
Board performance
Directors comprehensively prepare for, attend and participate
in Board and committee meetings.
The Board recognises the importance of continuously
monitoring and improving its performance and that of its
committees. Under their respective charters, the Board
and committees are required to assess their performance
annually, which was undertaken during the year. An
independent external performance evaluation of the Board
and its committees is conducted every three years, or as
otherwise determined by the Board. An independent external
performance evaluation was last undertaken in 2022.
The results of the internal assessments undertaken in 2023
were that the Board and each of its committees continue to
operate effectively. In the spirit of continuous improvement,
the Board agreed actions to further improve its effectiveness,
which are focused in the following areas: improving oversight
of execution of technology and digital strategies; continuing
to apply discipline to remain focused on the Board's priorities;
and supporting directors through a period of Board renewal.
Directors’ individual performance is also assessed annually.
Each director participated in an individual performance
interview with the Chair in 2023.
Responsible remuneration
The Board continues to monitor NAB’s executive and Group
remuneration frameworks to ensure they reinforce our
focus on customers, align with sustainable shareholder
value and are informed by risk, reputation, conduct and
values outcomes.
strategic objectives and risk appetite and reflect the
expectations of customers, regulators and shareholders.
Detailed information about the executive remuneration
framework changes effective from 1 October 2023 is provided
in the Remuneration Report.
The colleague remuneration framework was reviewed to
ensure alignment to APRA Prudential Standard CPS 511
Remuneration requirements. As a result, modifications were
made to the Group’s specialist incentive plans to provide
appropriate non-financial performance measures (being
individual risk management and conduct assessments),
effective from 1 October 2023. As a result of the changes, all
of NAB's incentive plans comply with APRA Prudential Standard
CPS 511 Remuneration and continue to support the Group’s
strategic objectives and risk appetite.
The Group successfully renegotiated the new Enterprise
Agreement (EA) in 2023. The new EA provides certainty about
pay and benefits, providing an average Fixed Reward increase
of 4.5% to eligible colleagues in January 2024, and ongoing
guaranteed increases in January 2025 and January 2026.
Progress has also been made on other key colleague
initiatives including colleague learning and other
enhancements to the employee value proposition offered by
NAB including the performance framework and other benefits
available to colleagues.
Further detail about NAB’s executive and colleague
remuneration frameworks, including NAB’s policies and
practices regarding the remuneration of non-executive
directors, the Group CEO, Group Executives and other
colleagues, is set out in the Remuneration Report.
A decision in 2023 to change the executive remuneration
framework with effect from 1 October 2023 was approved by
the Board. The change reflects the requirements under APRA
Prudential Standard CPS 511 Remuneration. The changes made
were to:
Shareholder engagement
NAB values open, timely and transparent communication
and engages with shareholders and investors in many
ways including:
•
•
Incorporate materially weighted non-financial measures
(being individual risk management and conduct) into long-
term variable reward to maintain a strong focus on
individual conduct and management of financial and non-
financial risks.
Increase the deferral period applicable to long-term
variable reward to align Executives with the shareholder
experience and encourage a focus on delivering
sustainable long-term value.
• Review the risk management and conduct framework to
enable the Board to apply adjustment mechanisms to
ensure remuneration outcomes are commensurate with
performance and risk outcomes over the long-term.
The Board considers these changes provide an appropriate
and fair remuneration framework to NAB's Executive
Leadership Team while supporting the Group’s purpose,
• Providing shareholders options on how they choose the
receive communications (electronically or by post).
• Sending electronic communications, such as open letters
and publications from the Chair and the Group CEO on key
developments and matters of interest.
• Providing information about NAB on its website, including in
relation to the Group’s policies and governance practices
and media releases.
• Directly responding to shareholder enquiries by email,
phone and post.
• Periodic trading updates, financial results and reports, ASX
announcements, investor presentations and briefings (all
of which are available in the Shareholder Centre section at
nab.com.au/shareholder).
•
In situations when the Group hosts an analyst and
investor presentation including interim and end of
(1) Tenure and gender statistics are for non-executive directors as at 30 September 2023.
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Board composition, diversity and performance (cont.)
financial year results, supporting materials are released
on the ASX Market Announcement Platform ahead of the
presentation commencing.
• Webcasting of significant market briefings and meetings,
including the AGM.
• The Chair, Group CEO, Group CFO and other senior
executives meet with domestic and offshore institutional
investors throughout the year.
NAB also engages directly with investment analysts, proxy
advisors and the Australian Shareholders’ Association.
NAB’s 2023 AGM will be conducted as a hybrid meeting.
Shareholders will have the opportunity to view presentations,
ask questions and submit votes at the physical meeting or
online during the AGM.
As in prior years, NAB will again invite shareholders to submit
questions in advance of the 2023 AGM, to help NAB understand
and address areas of interest or concern.
Each substantive resolution considered at the AGM will be
conducted by a poll. The Board considers that voting by a poll
is in the interests of shareholders as a whole and ensures
that the views of as many shareholders as possible are
represented at the AGM. Shareholders unable to attend the
hybrid AGM are encouraged to vote in advance of the meeting.
Shareholders can contact NAB or the NAB Share Registry
at any time, by mail, telephone, email or via the
Computershare Investor Centre. More than half of NAB’s
shareholders have elected to communicate with NAB and
Computershare electronically.
Colleague engagement
In 2023, the Board participated in a number of events with NAB
colleagues, including:
• Meetings with specific teams to learn about their day-to-
day work and areas of subject matter expertise.
• Meetings with senior leaders, which allowed directors to
experience the culture and capability of leaders.
• Site visits and events with colleagues to listen to
customers and support them with their needs.
Director induction and continuing education
Three new directors were appointed to the Board in 2023.
Each new director is provided with an orientation program
that includes discussions with management, and briefings and
workshops on NAB’s:
• Major lines of business.
• Strategic and financial plans.
• Risk management strategy, frameworks, compliance
programs and significant risk management matters,
including cyber and financial crime risk management.
•
Financial statements, including significant financial and
accounting matters.
• NAB’s performance management structure.
•
Internal and external audit programs.
• Purpose, values and Code of Conduct.
• Key policies and external commitments, such as
decarbonisation targets.
• Directors’ rights, duties and responsibilities.
Continuing education is provided for the Board through
a combination of internal and external presentations,
workshops with management, site visits and study tours.
Directors are also expected to keep up to date on topical
issues in their own time.
For further detail on the Board's continuing education in 2023,
refer to the skills matrix on page 75.
Directors' independence
All NAB directors are expected to bring independent and
unfettered judgement to Board deliberations.
To qualify as independent, a director must be independent
of management and free of any business, personal or other
association that could materially interfere with (or reasonably
be perceived to materially interfere with) the director’s
exercise of independent and unfettered judgement with
respect to issues before the Board, and to act in the best
interests of NAB and its shareholders.
The Board conducts annual reviews of the independence of
each of the directors. Directors are expected to provide
information as and when changes occur, and each non-
executive director is required to make an annual disclosure
to the Board of all relevant information.
A register of directors’ material interests is maintained and
periodically reviewed by each director.
If a director is involved with another company or firm that may
have dealings with NAB, those dealings must be at arm’s length
and on normal commercial terms.
Director tenure is a factor considered by the Board in
assessing the independence of a director but is not
determinative. As a guide, most directors would not stand for
re-election after serving nine years on the Board, however,
the Board may determine that a director continues to bring
valuable expertise, independent judgement and the ability to
act in the best interests of NAB beyond that period. The
overall tenure profile of the Board is also a relevant factor.
In considering the independence of each director, the
Board considers the factors outlined in the 4th edition
ASX Corporate Governance Principles and Recommendations.
The Board has determined for 2023 that all non-
executive directors identified on pages 64 to 68 are
independent and that the Board consisted of a majority of
independent directors.
To further assist in ensuring that the Board operates
independently of management, non-executive directors meet
in the absence of management at most scheduled Board and
committee meetings.
Conflicts of interest
Under Australian law, directors have a duty to avoid conflicts
of interest.
The NAB Conflicts of Interest Policy and the NAB Constitution
establish clear rules, controls and guidance regarding the
management of actual, potential or perceived conflicts
of interest.
Directors are expected to avoid any action, position or
interest that conflicts or appears to conflict with an interest
of NAB. This is a matter for ongoing and active consideration
by all directors, and any director who has a material personal
interest in a matter relating to NAB’s affairs must notify
the Board.
If a potential conflict of interest arises, NAB’s corporate
governance standards dictate that the director concerned
does not receive copies of the relevant Board papers and is
not present at meetings while such matters are considered.
In this way, the director takes no part in discussions and
exercises no influence over the other members of the Board.
If a significant conflict of interest with a director exists and
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Board composition, diversity and performance (cont.)
cannot be resolved, the director is expected to tender his or
her resignation.
For more information, please refer to the Corporate
Governance section of nab.com.au.
Access to management and independent
professional advice
The Board and its committees have free and unfettered
access to senior management, and any other relevant internal
or external party and information, and may make any enquiries
to fulfil their responsibilities.
The Board Charter and Board Committee Operating Rules
clearly state that the Board or its committees may
engage external consultants and experts as required, and
written guidelines entitle each director to seek independent
professional advice at NAB’s expense, with the prior approval
of the Chair. The Board can conduct or direct any investigation
to fulfil its responsibilities and can retain, at NAB’s expense,
any legal, accounting or other services that it considers
necessary from time to time to fulfil its duties.
Director and executive
shareholding requirements
To align with shareholders’ interests, the Board has adopted
a policy that within five years of appointment, non-executive
directors must hold ordinary shares equal in value of the
annual Chair fee for the Chair and base fee for all other non-
executive directors.
The value of a non-executive director’s shareholding is based
on the share price at the time shares were acquired.
Other than the three new directors, non-executive directors
have met their minimum shareholding requirement.
Newly appointed non-executive directors are expected to
acquire shares each year until the minimum requirement is
met by the end of year 5.
Minimum shareholding requirements for the Executive
Leadership Team are:
• Group CEO: two times fixed remuneration.
• Group Executives: one times fixed remuneration.
Newly appointed Executive Leadership Team members are
required to satisfy the minimum shareholding requirement
within a five-year period from the date of commencement in
their role.
The Group CEO and other Group Executives have met, or are on
track to meet their minimum shareholding requirement.
Details of non-executive director and Executive Leadership
Teams’ NAB shareholding requirements are set out in the
Remuneration Report.
78
National Australia Bank
Board committees
Nomination & Governance Committee
Committee purpose
2023 areas of focus
Relevant information
Supports the Board
on composition and
governance matters.
• Board composition and skills: assessing the necessary and
• Must have a minimum
desirable skills and competencies of the Board and Chair, and
of the committees and committee chairs, as well as making
recommendations on continuing education and development
for the Board and directors.
• Nominations: with the assistance of an external recruitment
consultant, identifying potential director candidates and
making recommendations to the Board on the selection and
re-election of directors.
• Governance: reviewing corporate governance principles
and policies.
of three independent non-
executive directors.
•
The Chair of the Board is
Committee Chair.
2023 Members:
•
Philip Chronican (Committee Chair)
• Anne Loveridge
•
Simon McKeon
Audit Committee
Committee purpose
2023 areas of focus
Relevant information
•
Financial statements: overseeing the integrity of the Group’s
accounting and financial statements, including compliance
with accounting standards and policies.
• Must have a minimum
of three independent non-
executive directors.
• Reporting: overseeing the integrity of the Group's financial,
regulatory and corporate reporting processes.
• Has a member who also sits on the
Risk & Compliance Committee.
Supports the Board
with overseeing
the integrity of
accounting and financial
statements and the
financial, regulatory and
corporate reporting
processes of the
Group, the Internal
Audit function, the
external auditor, and
the Group Whistleblower
Protection Policy
and Program.
• Audit results: reviewing key internal and external audit findings
and insights.
• Auditor performance and independence: overseeing the
performance and independence of Internal Audit and the
external auditor, including review of the adequacy of internal
and external audit plans and resourcing.
• Whistleblower Program: overseeing the effectiveness of the
Group Whistleblower Protection Policy and Program including
material matters being investigated, key themes and trends.
People & Remuneration Committee
Committee purpose
2023 areas of focus
Supports the Board
in discharging
its responsibilities
relating to people
and remuneration
strategies, policies
and practices of
the Group. The
committee undertakes
these activities with the
objective that they align
with and enable the
overall Group Strategy
and support the
Group’s purpose, values,
strategic objectives and
risk appetite (while not
rewarding conduct or
behaviours that are
contrary to these aims).
• Strategy execution: monitoring the impact from, and
the embedding of, key elements of the Colleague
Strategy, including leadership, talent development, succession
and engagement.
• Remuneration governance: monitoring how remuneration
and performance frameworks (including consequence
management) are applied across the Group, particularly
ensuring effective connections between risk management
and remuneration outcomes. Monitoring the implementation
of APRA Prudential Standard CPS 511 (Remuneration) and the
finalisation of the new Enterprise Agreement, in particular, their
impact on NAB's people and remuneration strategies, policies
and frameworks.
•
Executive performance: evaluating individual executive
performance in the context of Group performance at least
twice each reporting period, and recommending to the
Board the fixed remuneration and variable reward outcomes
for the Group CEO, Group Executives and certain other
senior executives. Information on the process for evaluating
executive performance is set out in the Remuneration Report.
• Group performance and variable reward: considering Group
performance for 2023 (with the assistance of other Board
committees) and making a Group Performance Indicator
(GPI) recommendation to the Board for the Group Variable
Reward Plan.
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• Has members who are financially
literate and at least one member
with appropriate accounting or
financial expertise.
2023 Members:
• David Armstrong (Committee Chair)
• Doug McKay
•
•
Kathryn Fagg (until February 2023)
Peeyush Gupta (from March 2023)
• Alison Kitchen (from
September 2023)
The Group Chief Financial Officer
(CFO), Executive, Internal Audit
and senior executives of the
Group’s external auditor, EY,
attended all eligible Committee
meetings. The Group Deputy CFO
attended the majority of eligible
Committee meetings.
Relevant information
• Must have a minimum
of three independent non-
executive directors.
• Has a member who also sits on the
Risk & Compliance Committee.
2023 Members:
• Anne Loveridge (Committee Chair)
• Ann Sherry
•
•
Peeyush Gupta (until February 2023)
Kathryn Fagg (from March 2023)
The Board Chair, the Group CEO,
and the Group Chief Risk Officer
(CRO) attended all eligible Committee
meetings. The Group Executive,
People & Culture and the Executive,
Internal Audit attended the majority
of eligible Committee meetings.
2023 Annual Report
79
Board committees (cont.)
Risk & Compliance Committee
Committee purpose
2023 areas of focus
Relevant information
Supports the Board
with oversight of the
Group’s risk profile, Risk
Management Framework
(covering financial,
non-financial and
emerging risks), material
risks, risk mitigation
practices, adherence
to Board approved
risk appetite and
internal compliance and
control systems, while
guiding management’s
promotion and
maintenance of a risk-
based culture.
• Risk appetite: reviewing and overseeing the Group and NAB Risk
Appetite Statement and Risk Management Strategy, covering
existing and emerging financial and non-financial risks.
• Must have a minimum
of three independent non-
executive directors.
• Risk management: reviewed the Board’s annual Risk
Management Declaration to APRA for the year ended
30 September 2022 and overseeing management’s progress in
addressing matters identified in that Declaration.
• Material risk updates: overseeing key material risk categories,
including: Credit risk; Balance Sheet & Liquidity risk; Market
risk; Operational risk; Compliance risk; Conduct risk; and
Sustainability risk. The Board has retained direct oversight of
Strategic risk.
• Compliance culture: continued focus on regulatory and
legislative requirements and the controls and compliance
environment to monitor adherence and shortcomings.
• Controls environment: continued review of the health and
transformation of controls.
• Audit matters: reviewing key internal audit findings and
insights, including monitoring management’s response to
matters raised.
•
•
Technology: reviewing updates relating to the technology risk
profile, technology resilience, technology currency debt, and
cyber risks.
External environment: reviewing regular updates on credit,
market and liquidity conditions and the impact of external
conditions on certain portfolios.
• Capital and liquidity: continued emphasis on monitoring and
reviewing the level of capital and liquidity held by the Group.
• Has members who also sit on
the Audit Committee and People &
Remuneration Committee.
2023 Members:
•
Simon McKeon (Committee Chair)
• David Armstrong
•
•
Kathryn Fagg
Peeyush Gupta
• Carolyn Kay (from July 2023)
The Group CRO, Group CFO, Executive,
Internal Audit and senior executives
of the Group’s external auditor,
EY, attended all eligible Committee
meetings. The Board Chair and the
Group CEO attended the majority
of meetings.
Customer Committee
Committee purpose
2023 areas of focus
Relevant information
Supports the Board
with overseeing the
importance given to
the voice of the
customer and the focus
on customer outcomes
at NAB.
• Customer outcomes: monitoring NAB’s response to scams and
• Must have a minimum
support for customers experiencing vulnerability .
• Product governance: monitoring NAB’s adherence to
the ASIC Design & Distribution Obligations and product
simplification progress.
• Customer complaints: monitoring NAB’s complaint capture,
handling and themes.
• Customer remediation: reviewing and evaluating management
reports on both banking and wealth remediation programs.
• Customer Advocates: reviewing reports from the Customer
Advocate Banking on advocacy and insights to deliver
fair outcomes for NAB customers that align with
community expectations.
of three independent non-
executive directors.
2023 Members:
• Ann Sherry (Committee Chair)
• Doug McKay
• Anne Loveridge
• Christine Fellowes (from June 2023)
The Group Executive, Legal and
Commercial Services attended the
majority of the meetings.
Subsidiary boards
NAB has a number of subsidiary companies. The activities of each subsidiary company in the Group are overseen by that
company’s own board of directors. The Board’s confidence in the activities of its controlled entities stems from the quality of
the directors on those subsidiary boards and their commitment to NAB’s objectives. NAB has one significant subsidiary, BNZ.
The Chair of the BNZ Board is Doug McKay who is also a NAB director. NAB directors have a standing invitation to attend board
meetings of BNZ to develop a broader understanding of its operations.
The Group's subsidiary governance framework sets out the corporate governance requirements for subsidiaries operating within
the Group environment including different roles and responsibilities of subsidiaries, their boards and management.
80
National Australia Bank
How We Work
Governance, conduct and culture
The Board approves NAB’s purpose, values and Code of Conduct to underpin the desired culture within NAB’s business
and oversees the establishment by management of a culture that is focused on sound risk management and customer
outcomes. NAB's refreshed strategy, released in 2020, clearly stated why NAB is here: to serve customers well and help our
communities prosper.
NAB values and culture
NAB updated its company values in 2020 in conjunction with a refresh of its Strategy. These values, known as How We Work,
identify the core elements of behaviour expected of colleagues for NAB to deliver its strategy and clearly articulate its
target culture.
The below articulation of “what we do” and “what we don’t do” provides guidance for all colleagues to understand the standards
expected at NAB. How We Work is the basis of NAB’s Code of Conduct and integrated into its performance management
framework. To strengthen NAB's commitment to service delivery and serving its customers well, the "excellence for customers"
value was updated in 2023.
How We Work has been approved by the Board and is summarised below.
To achieve NAB's target culture, the Colleague Strategy was established to deliver the goal of having trusted professionals who
are proud to be a part of NAB. NAB's strategic aspirations include:
Talented professionals who shape the future of banking
Inclusive culture we can be proud of
NAB fosters diverse, market-leading banking professionals
and attracts, develops and retains top talent. NAB empowers
colleagues to learn and grow, build digital and data capabilities
and pursue exciting career opportunities.
Distinctive leaders who inspire performance
NAB builds clear, capable and motivated leaders who drive
positive change and connect colleagues to why NAB is here: to
serve customers well and help our communities prosper. NAB
people leaders create a winning environment and celebrate
the successes and contributions of all.
Empowered colleagues who are motivated
NAB cares deeply about customers and is passionate
about exceptional service and executional excellence. NAB
focuses on top priorities, works with flexibility and pace, and
colleagues are rewarded fairly for strong performance.
NAB aims for an agile, progressive and accountable culture
where colleagues role model How We Work and collaborate to
accelerate decision-making and customer outcomes.
NAB has a continued focus on improving its culture and
risk culture, underpinned by its culture and risk culture
framework which is based on How We Work. NAB’s culture
and risk culture framework has evolved in maturity over
time, with the goal of having an approach that is best in
class. Progress is reported to the Board twice yearly and
measurement uses data including colleague engagement
Heartbeat surveys, objective performance metrics, operating
model effectiveness assessments and independent expert
review. The varied data inputs provide a holistic and
integrated assessment and bring meaningful insights to
inform management action on culture and risk culture.
NAB's Inclusion and Diversity Policy is available in the Corporate
Governance section of nab.com.au. Information about NAB's
measurable objectives is located in the Inclusion and diversity
section of this report.
2023 Annual Report
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How We Work (cont.)
Conduct
NAB has a suite of policies and practices to promote a
culture of honesty and ethical behaviour. Policy compliance
is monitored and consequence management procedures
exist for policy breaches. Senior leaders are accountable for
performance against risk and conduct measures.
NAB's Code of Conduct
NAB’s Code of Conduct (the Code) was revised in 2020 and
approved by the Board.
The Code outlines what is expected of directors, leaders,
colleagues and contractors who perform services on
NAB’s behalf.
The Code captures NAB’s legal obligations and an expectation
to act ethically and responsibly towards customers,
colleagues and communities. The Code emphasises How We
Work, and the key policies and guidelines which must be
followed to achieve expected outcomes. There is a strong
emphasis on speaking up about concerns and a guide to
ethical decision making.
The Code is supported by a renewed approach to conduct and
consequence management. Each business and enabling unit
has established professional standards forums to review or
note breaches of the Code at least quarterly, taking action to
set the tone and reinforce NAB’s standards of conduct and
culture. Any material breaches or conduct that is materially
inconsistent with the expected outcomes in the Code are
reported to the People & Remuneration Committee.
NAB’s Code of Conduct is available in the Corporate
Governance section at nab.com.au/about-us/
corporate governance.
Banking Executive Accountability Regime (BEAR)
For the purposes of BEAR, NAB has registered certain
individuals (the directors, Group Executives, Executive Internal
Audit and Executive Group Money Laundering Reporting
Officer) as ‘Accountable Persons’ with APRA. NAB undertakes
appropriate checks before appointing executives or putting
someone forward for election as a director.
NAB’s implementation of BEAR continues to strengthen and
clarify its accountability structures and practices. This helps
to ensure clearer delegation and decision-making processes.
All NAB Accountable Persons have a letter of appointment
(in the case of directors) or written employment agreement
(in the case of executives), which governs the terms of
their appointment, as well as a detailed BEAR Accountability
Statement which is lodged with APRA.
On 5th September, the Commonwealth Parliament passed the
Financial Accountability Regime Bill (FAR). FAR will replace BEAR
and expands upon the obligations imposed on NAB and its
Accountable Persons under BEAR. FAR will come into force for
NAB on 15 March 2024.
Escalation and whistleblower protection
The Group Whistleblower Protection Policy and Whistleblower
Program reflects NAB’s ambition for an environment
where colleagues feel safe and empowered to speak up
about wrongdoing.
NAB encourages colleagues to raise concerns about
wrongdoing including conduct that may be illegal,
unacceptable or improper.
By speaking up, colleagues help to identify and address
wrongdoing as early as possible ensuring NAB's focus is on
getting the basics right and serving customers well.
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National Australia Bank
The Group Whistleblower Program provides confidential
channels for colleagues (current and former colleagues,
officers, contractors and/or suppliers) to raise concerns,
including through FairCall, an independently monitored
external hotline service operated by KPMG.
The Group Whistleblower Protection Policy provides
information on the support and protection available to
whistleblowers, how matters will be investigated and
reinforces NAB's zero tolerance for any act of reprisal against
those who speak up.
The Program has been established as an independent
function with direct escalation and reporting lines
to the Board’s Audit Committee via NAB’s Group
Whistleblower Committee.
The Group Whistleblower Protection Policy is available in the
Corporate Governance section at nab.com.au
Anti-bribery and corruption policy
The Group is committed to preventing financial crime and
takes a zero-tolerance approach to bribery and corruption.
This is reflected in the Group’s Anti-Bribery and Corruption
(ABC) Policy and Framework as well as the Group’s dedication
to acting:
• Honestly, with integrity and upholding the highest ethical
standards in its global activities.
•
In compliance with all applicable anti-bribery and
corruption laws in all jurisdictions in which the
Group operates.
The prohibition against bribery and corruption in the ABC
Policy applies to NAB’s entities, colleagues and all agents,
contractors and other third parties acting for or on
behalf of the Group. The Group strictly prohibits bribery
in any form (including facilitation payments). The ABC
Policy includes additional requirements around gifts and
entertainment involving government officials which require
approvals regardless of value. The ABC Policy is supplemented
by supporting procedures which define minimum standards for
compliance with the ABC Policy. Material breaches of the ABC
Policy are reported to the Board by the Group CRO. NAB is a
Cornerstone Member of Transparency International Australia,
a member of the Bribery Prevention Network and is a signatory
to the UN Global Compact, pledging to work against corruption
in all its forms.
The Group’s ABC Policy is available in the Corporate
Governance section at nab.com.au.
Group disclosure and external communication policy
The Corporations Act 2001 (Cth) and the ASX Listing Rules
require that, subject to certain exceptions, once NAB
becomes aware of any information concerning it that
a reasonable person would expect to have a material
effect on the price or value of NAB securities (‘market
sensitive information’), NAB will immediately disclose that
information to the ASX and where applicable, to other relevant
stock exchanges.
NAB manages compliance with its continuous disclosure
obligations through its Group Disclosure and External
Communications Policy and associated guidance notes. NAB’s
Disclosure Committee, comprised of senior executives, has
primary responsibility regarding NAB’s disclosure obligations.
Potentially disclosable matters are promptly referred to the
Disclosure Committee for assessment and determination. NAB
operates a strict decision-making regime to enable it to
monitor compliance with its disclosure obligations.
How We Work (cont.)
All members of the ELT are responsible for ensuring their
teams adhere to the Policy and for liaising directly with
the Group Executive, Legal and Commercial Services or the
General Counsel Corporate on any potentially disclosable
matters. Routine administrative ASX announcements are made
by the Group Company Secretary without reference to the
Disclosure Committee.
material supply chain relationships; (ii) banker identification
and reporting of potential modern slavery and human
trafficking concerns and Financial Crime team monitoring and
investigation of human impact crimes; and (iii) consideration
of modern slavery and human trafficking risk in ESG risk
assessments conducted as part of customer credit risk
assessment and due diligence processes, where applicable.
Where appropriate, the Board is consulted on disclosures of
utmost significance and all announcements of major matters
require consideration and approval by the Board.
The Group's Human Rights Policy is available in the Human
rights approach section at nab.com.au/content/dam/nabrwd/
documents/policy/corporate/human-rights-policy.pdf.
The Group's Modern Slavery and Human Trafficking
Statement is available in the Sustainability performance
and reporting section at nab.com.au/about-us/social-
impact/modern-slavery-statement.
The Board receives copies of all material market
announcements promptly after they have been made.
The Group Disclosure and External Communications Policy is
available in the Corporate Governance section at nab.com.au/
about-us/corporate governance.
Restrictions on trading in NAB securities
NAB’s Group Securities Trading Policy and associated guidance
notes explain the law and the policy for its colleagues to
comply with when trading in NAB securities.
NAB has black-out periods prior to the release of the Group’s
financial results during which colleagues must not trade in NAB
securities. In addition, ad hoc restrictions may be imposed on
all, or individually identified, colleagues from time to time when
there is a heightened risk of those colleagues coming into
contact with market sensitive information.
All NAB colleagues are prohibited from using derivatives or
otherwise entering into hedging arrangements in relation to
elements of their remuneration that are unvested.
In addition, members of key management personnel and their
closely related parties are prohibited from using derivatives
or otherwise entering into hedging arrangements in relation
to elements of their remuneration that are unvested or which
have vested but remain subject to forfeiture conditions.
For more detail, refer to the Remuneration Report.
The Group Securities Trading Policy is available in the
Corporate Governance section at nab.com.au/about-us/
corporate governance.
Group political contributions policy
Since 2016, NAB has not made donations to any political party,
parliamentarian, elected official or candidate for political
office. From time to time, NAB representatives may pay to
attend political events and business forums hosted by major
political parties. Any payments for event attendance received
by political parties will be included in the Australian Electoral
Commission register. For detail on NAB’s approach to engaging
on public policy, including further information on political
contributions, see the Stakeholder Engagement section on
page 23.
NAB considers its Group Political Contributions Policy every
two years. The Group Political Contributions Policy is available
in the Corporate Governance section at nab.com.au/about-
us/corporate governance.
Modern slavery and human trafficking statement
The Group provides an annual Modern Slavery and Human
Trafficking Statement. From 2020, this statement has been
pursuant to both the Modern Slavery Act 2015 (UK) and
the Modern Slavery Act 2018 (Cth). Consideration of modern
slavery is incorporated into the Group Human Rights Policy and
relevant risk management practices and processes applicable
to the Group’s customer and third-party relationships. This
includes: (i) management of sustainability risk (incorporating
modern slavery and human trafficking risk), within the Group's
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2023 Annual Report
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Assurance and control
Periodic corporate reports
The Annual Report, Climate Report, Investor Presentations,
Quarterly Trading Updates, Full Year Results Management
Discussion and Analysis and Pillar 3 Report form the suite of
the Group’s periodic corporate reports.
Each report is subject to the Group’s risk management
and internal control systems. Assurance over risk
management and internal control systems is achieved
through assessments of the effectiveness of controls.
The integrity of the Group’s periodic corporate reports is
underpinned by structures and processes within the Group
functions that support areas of judgement, validation of
information and the maintenance of proper records for
all information.
The Group’s reporting policies incorporate Australian
and international regulatory, legislative and prudential
requirements. The Group's Enterprise Reporting Assurance
team verify and check information across the suite of the
Group’s periodic corporate reports. Group Executives and
subject matter experts certify the information pertaining to
their area of responsibility is materially complete and not
materially misleading by statement or omission.
The level of external assurance provided on the suite of
the Group’s periodic corporate reports is disclosed by the
external auditor in their reports presented in NAB’s 2023
Annual Report and by KPMG in their reports available on NAB's
website over a selection of climate-related measures and
disclosures presented in NAB's 2023 Climate Report.
Where there is no external assurance provided,
management’s assurance procedures are considered
adequate by the Audit Committee for ensuring the Group’s
periodic corporate reports are materially accurate, balanced
and provide investors with appropriate information to make
informed decisions.
Internal Audit
The role of Internal Audit is to provide independent assurance
on the adequacy and effectiveness of NAB’s Risk Management
Framework. Internal Audit forms the third line of risk
accountability in NAB’s Risk Management Framework.
The Executive, Internal Audit needs to be suitably qualified for
the role.
A recommendation on the appointment, performance and
dismissal of the Executive, Internal Audit is made by the Audit
Committee to the Board. The Audit Committee monitors the
activities and performance of Internal Audit and assesses
whether it remains independent of management and is
adequately resourced and funded.
Internal Audit has a direct reporting line to the Chair of the
Audit Committee and informal reporting lines to the Group CEO
and Group CFO.
As well as reporting regularly to the Audit Committee, the
Executive, Internal Audit provides regular reports to the
Board’s Risk & Compliance Committee on risk and control
matters and attends People & Remuneration Committee
meetings to provide insights on conduct and culture matters.
Both the External and Internal Audit functions have full and
unrestricted access to all colleagues, records and systems as
necessary to undertake their activities.
For the Board to determine that the Group's
financial statements and disclosures are
complete and accurate, it reviews information
provided by management. Independent and
objective assurance is provided by the
Group’s external auditor, EY, on the audited
financial report.
External Audit
Throughout 2023, NAB’s external auditor was EY. The Audit
Committee is responsible for the appointment, evaluation,
management and removal of the external auditor, and the
approval of the external auditor’s annual fees (subject to
shareholder approval where required). The Audit Committee
oversees EY’s responsibilities and regularly meets with EY to
review the adequacy of the external audit arrangements with
emphasis on effectiveness, performance and independence.
This includes an annual review of the external audit plan.
To foster open communication and to facilitate appropriate
matters coming to the attention of the Audit Committee, the
Group CEO, Group CFO, Deputy Group CFO, Group CRO, Group
Executive Legal & Commercial Services, Executive General
Counsel Corporate, Executive Internal Audit, and the lead
External Audit Partner all have direct and unfettered access
to the Audit Committee.
NAB does not employ or appoint to the Board, Group or any
subsidiary board or management body, any current or former
partner, principal, shareholder or professional employee of
the external auditor or their family members, if to do so would
impair the auditor’s independence.
The Audit Committee has adopted a Group External Auditor
Independence Policy that requires pre-approval of any
services proposed to be provided by the external auditor to
ensure that independence is maintained. The Audit Committee
delegates authority to the Group CFO and Deputy Group CFO
to approve those services where the expected cost of the
service is less than $200,000 (excluding local taxes). Services
over $200,000 (excluding local taxes) require the approval by
the Chair of the Audit Committee as the Audit Committee
delegated authority. The exercise of any such delegation is
reported to the Audit Committee at least biannually.
The Group External Auditor Independence Policy defines audit-
related and taxation-related services and stipulates that
certain services are entirely prohibited from being provided
by the external auditor to ensure the independence of
the external auditor is maintained. Non-audit services are
permitted where the service meets auditor independence
requirements with the approval by the Chair of the
Audit Committee.
Unless the Audit Committee approves otherwise, fees paid for
the provision of audit-related, taxation-related and non-audit
services must not exceed fees paid for audit services in any
year. Details of the services provided by the external auditor
to the Group and the fees paid or payable for such services
are set out in the Note 34 Remuneration of external auditor in
the Financial Report.
Legislation requires the rotation of the external audit senior
personnel who are significantly involved in NAB’s audit after
five successive years, including the Lead Partner.
The external auditor attends the AGM and is available to
answer shareholder questions regarding the conduct of the
audit and the content of the audit report.
84
National Australia Bank
Compliance with ASX corporate
governance recommendations
This statement has been approved by the Board of National Australia Bank Limited (Board) and is
current as at 30 September 2023.
NAB's Appendix 4G (a checklist that cross references the disclosures in this Statement to the ASX Corporate Governance
Principles and Recommendations) is available in the Corporate Governance section of nab.com.au.
Before publication of NAB's 2023 Annual Report, the Board received a joint declaration from the Group CEO and the Group
CFO that:
•
•
In their opinion the financial records of NAB have been properly maintained in accordance with the Corporations Act
2001 (Cth).
In their opinion the financial statements and notes comply with the appropriate accounting standards and give a true and fair
view of the financial position and performance of the Group.
• Their opinion was formed based on a sound system of risk management and internal control which is operating effectively.
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Risk management
Risk management overview
Group’s strategic objectives and business plan, in accordance
with the requirements of APRA Prudential Standard CPS 220 Risk
Management. This RMD is currently being undertaken within the
time frame permitted.
Environmental, Social and Governance (ESG)
Risk Management
ESG risks are identified, measured, monitored, reported and
overseen in accordance with the Group’s RMS and RMF
and reflected in the Group RAS and relevant supporting
divisional credit appetite strategies, ESG-related policies and
management practices. Executive management’s Group Credit
& Market Risk Committee oversees Sustainability risk, which
is defined as ESG risk and includes climate and human rights-
related risk, as a significant part of the Group's exposure to
these risks is through lending to customers.
The Group's climate change disclosures align with TCFD
recommendations. In 2023, TCFD disclosures continue to be
provided in a standalone Climate Report, alongside a summary
in this Report on page 37.
The Group's modern slavery statement is
available on nab.com.au/about-us/social-impact/modern-
slavery-statement.
Updates on ESG risk are provided to the Executive Risk &
Compliance Committee, Board Risk & Compliance Committee
and Board as appropriate. Further information on the Group’s
material exposures to ESG risks is set out in ‘Disclosure on
risk factors’. Further detail on how the Group manages risks
presented by climate change within its Risk Management
Framework can be found in the Group's 2023 Climate Report.
Risk is the potential for harm and is inherent in
NAB's business. The Group's ability to manage risk
effectively is critical to being a safe and secure
bank that can serve customers well and help our
communities prosper. This is achieved through
the Risk Management Framework, documented in
the Risk Management Strategy.
Risk Management Framework
The Risk Management Framework (RMF) consists of systems,
structures, policies, processes and people within the Group
that manage material risks.
Material risks are those that could have a material impact,
both financial and/or non-financial, on the Group or on
the interests of customers. The Group's material risks are
categorised as: strategic risk, credit risk, market risk, balance
sheet and liquidity risk, operational risk, compliance risk,
conduct risk and sustainability risk.
The Group applies a ‘Three Lines of Accountability’ operating
model in relation to the management of risk. The overarching
principle of the model is that risk management capability must
be embedded within the business to be effective.
The role of each line is:
• First Line – Businesses own risks and obligations, and the
controls and mitigation strategies that help manage them.
• Second Line – A functionally segregated Risk function
develops risk management frameworks, defines risk
boundaries, provides objective review and challenge
regarding the effectiveness of risk management within
the first line businesses, and executes specific risk
management activities where a functional segregation of
duties and/or specific risk capability is required.
• Third Line – An independent Internal Audit function
reporting to the Board monitors the end-to-end
effectiveness of risk management and compliance with
the RMF.
Risk governance refers to the formal structure used to
support risk-based decision-making and oversight across
the Group's operations. This consists of the Board, Board
committees and management committees, delegations of
authority for decision-making, management structures and
related reporting. The risk governance structure increases
transparency and the sharing of insights, guidance and
challenge to support each BEAR Accountable Person(1)
in their decision-making when discharging their individual
accountabilities. The Group CRO report highlights risk appetite
measures, along with commentary when triggers and limit
thresholds are exceeded. It is discussed at each scheduled
meeting of the Executive Risk & Compliance Committee, the
Board Risk & Compliance Committee and the Board. It is also
provided to those bodies between scheduled meetings when
it is timely or appropriate to do so.
The Risk Appetite Statement is a key component of our RMF
and sets out boundaries so that the Group operates within
acceptable levels of risk and in compliance with obligations
and commitments.
The updated Risk Management Strategy (RMS) and RAS were
approved by the Board in early October 2022 and submitted
to APRA. The Board also makes an annual Risk Management
Declaration (RMD) to APRA for NAB, confirming that NAB has
a RMF that is appropriate for the size, business mix and
complexity of the Group, and which is consistent with the
(1) For the purposes of BEAR, NAB has registered certain individuals (the directors, Group Executives, Executive Internal Audit and Executive Group Money Laundering
Reporting Officer) as ‘Accountable Persons’ with APRA.
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National Australia Bank
Risk factors
Disclosure on risk factors
Risks specific to the Group
Set out below are the principal risks and uncertainties
associated with the Company and its controlled entities
(Group). It is not possible to determine the likelihood of these
risks occurring with any certainty.
However, the risk in each category that the Company
considers most material is listed first, based on the
information available at the date of this Report and the
Company’s best assessment of the likelihood of each risk
occurring and the potential magnitude of the negative
impact to the Group should such risk materialise. In the
event that one or more of these risks materialises, the
Group’s reputation, strategy, business, operations, financial
condition, and future performance could be materially and
adversely impacted.
The Group’s Risk Management Framework and internal controls
may not be adequate or effective in accurately identifying,
evaluating, or addressing risks faced by the Group. There
may be other risks that are unknown or deemed immaterial,
but which may subsequently become known or material.
These may individually, or in aggregate, adversely impact the
Group. Accordingly, no assurances or guarantees of future
performance, profitability, distributions or returns of capital
are given by the Group.
Strategic risk
Strategic risk is the risk to earnings, capital, liquidity, funding,
or reputation arising from an inadequate response to
changes in the external environment and risk of failing to
properly consider downstream impacts and achieve effective
outcomes when executing material change programs.
Strategic initiatives may fail to be executed, may not
deliver all anticipated benefits, or may otherwise change
the Group’s risk profile.
The Group’s corporate strategy sets its purpose, ambition,
and objectives.
The Group prioritises and invests significant resources in
the execution of initiatives that are aligned to its chosen
strategy, including transformation and change programs.
These programs primarily focus on customers, technology,
digital and data assets, infrastructure, business improvement,
cultural transformation, regulatory compliance, and changes
to associated controls, and may have dependencies on
external suppliers or partners. There is a risk that these
programs may not realise some or all of their anticipated
benefits and outcomes. These programs may also increase
operational, compliance, and other risks, and new or existing
risks may not be appropriately assessed or controlled.
The Group’s strategy includes Environmental, Social or
Governance (ESG) related initiatives, including a climate
strategy and various obligations, targets and goals. Setting
and achieving the Group’s sector decarbonisation targets
and managing risks including climate change related
financial risks and ESG-related risks are influenced by
the Group’s customers, policy makers, the emerging
ESG-related regulatory and disclosure environment and
other stakeholders.
Any failure by the Group to deliver in accordance with its
strategy, or to deliver strategic programs effectively, may
result in material losses to the Group, reputational damage, or
a failure to achieve anticipated benefits, and ultimately, may
materially and adversely impact the Group’s operations and
financial performance and position.
The Group faces a rapidly changing external environment.
The Group operates in a dynamic macro-economic
environment. The impact of slowing global and domestic
economic growth, rising unemployment and interest rates,
and falling consumer confidence can reduce demand for
credit, adversely impacting Group revenue. In addition, Group
expense plans may be at risk if inflation does not normalise in
line with expectations, particularly with respect to employee
remuneration and technology costs.
There is also substantial competition across the markets
in which the Group operates. The Group faces competition
from established financial services providers and other
parties, including foreign banks and non-bank competitors,
such as fintechs, Buy Now Pay Later (BNPL) providers, digital
platforms and large global technology companies, some of
which have lower costs, or operating and business models,
technology platforms or products that differ from or are more
competitive than the Group’s and some of which are subject
to less regulatory oversight. In particular, there are some
financial services providers focused on the business banking
segment with investment in improved customer experiences.
This poses a risk to the Group’s position in that segment.
In addition, evolving industry trends, technology changes, and
environmental factors have impacted, and may continue to
impact customer needs and preferences and the Group may
not predict these changes accurately or quickly enough,
or have the resources and flexibility to adapt in sufficient
time, to meet customer expectations and keep pace with
competitors. These risks are heightened in the current
context in which technologies, including those that may
impact the financial services industry, continue to evolve at
a rapid pace.
Other trends and recent regulatory and legislative
developments that may impact the Group include, but are not
limited to:
•
•
Increased focus on digital, data and analytics capabilities
with the objective of creating easy and seamless customer
experiences. The rapid development and deployment of
artificial intelligence (AI) capabilities has emerged as a key
strategic consideration. Inadequate or lack of adoption
of AI within business processes could pose a strategic
disadvantage to the Group relative to its competitors who
deploy AI tools and could result in unwanted financial and
non-financial consequences for the Group. AI regulation is
developing globally and its impact on the Group’s business
is currently unknown.
Increased demand for green or sustainability-related
products or increased lending to assist customers in
achieving their ESG-related performance objectives, for
example, sustainability-linked loans, or, correspondingly,
increased scrutiny of products or lending that are
perceived to be inconsistent with the ESG-related
performance objectives of the Group or its stakeholders.
• Continued competitive pressures in home lending,
particularly as customers of the Group revert to variable
rate loans as fixed rate periods expire on loans entered
into at historically low rates in recent years. This increases
the risk that customers will refinance outside the Group.
•
Increased competition for customer deposits in the
context of an uncertain market and elevated interest rate
environment, with the risk of further increases to the
Group’s cost of funds relative to its competitors.
• Ongoing growth of the broker market and the risk of
disintermediating customer relationships.
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Risk factors (cont.)
• The continued implementation of the Consumer Data
Right (CDR), known as ‘Open Banking’, in the Australian
banking sector. The CDR seeks to increase competition
and innovation between service providers by mandating
and standardising the sharing of certain consumer and
business customer data and data relating to their products
and services. In response to the 2022 Statutory Review
of the CDR recommendations proposed by the Australian
Treasury, the Australian Government committed funding in
its 2023-24 budget over the next two years to support
the CDR to maturity in banking and energy, progress its
expansion to non-bank lending, progress the design of
action initiation, deliver cyber security enhancements, and
develop a trust brand strategy that will support consumer
confidence in the CDR. Where large global technology
companies choose to participate in the CDR, there is
potential for these companies to access more data which
may increase their competitiveness including in other
sectors, such as financial services.
• The New Zealand (NZ) Government’s decision to establish a
CDR in NZ and for banking to be the first sector designated
under the legislation. An exposure draft of the Customer
and Product Data Bill was released in June 2023 for industry
feedback. The adoption of Open Banking in NZ is designed
to increase competition in the NZ banking industry, and may
increase compliance costs for established institutions,
including Bank of New Zealand (BNZ) and may limit BNZ’s
ability to charge for access to payments or data.
nascent, but emerging, across all markets in which the
Group operates, which may increase the Group’s costs,
or require the Group to invest in resources to adapt its
products or systems to new technologies. The release
of Basel Committee’s final Prudential Treatment of Crypto-
asset Exposures in December 2022 is expected to provide
the basis for the development by the Australian Prudential
Regulation Authority (APRA) of its prudential standard in this
area. APRA has announced it will consult on the prudential
treatment for crypto-assets in 2024, which is expected to
come into effect in 2025.
• The commencement of a market study into competition
for personal banking services in NZ by the NZ Commerce
Commission. The NZ Commerce Commission’s final report,
which will set out its findings on factors that may
affect competition in personal banking, including bank
profitability, and any recommendations, is due to be
released in August 2024.
Competition for customers, which remains heightened in the
current interest rate environment, can lead to compression in
profit margins and loss of market share. Intense competition
increases the risk of additional price pressure, especially in
commoditised lines of business, such as mortgages, where
the providers with the lowest unit cost may gain market
share and industry profit pools may be eroded. Such factors
may ultimately impact the Group’s financial performance and
position, profitability and returns to investors.
• The evolving and increasingly complex payments
Risks may arise from pursuing acquisitions and divestments.
landscape, including increasing use of digital payments,
new payments infrastructures and emerging technology,
and shift away from traditional payment methods. To this
end, the Australian Government is consulting on proposed
changes to the Payments Systems (Regulation) Act 1998 to
address new payments-related risks following the release
of its Strategic Plan for Australia’s Payments System in
June 2023.
• The Reserve Bank of Australia (RBA) proposes to enhance
the competitiveness, efficiency and safety of Australia’s
debit card market, including expectations for tokenisation
of payment cards and storage of primary account
numbers in the Australian market. AusPayNet is working
with the industry to meet the RBA’s expectations
including developing more specific tokenisation standards,
if required. Standardisation of tokenised dual network
debit cards will improve portability for both scheme and
proprietary tokens to reduce the friction for merchants
that wish to switch payment service providers.
• The continued consumer and institutional adoption of
cryptocurrencies and other digital assets. The rate of
digital asset adoption, digital asset product creation (for
example, stable coins and decentralised finance) and
government responses are expected to influence the
future of the sector and its impact on the Group. The
RBA has completed a research project exploring central
bank digital currency (CBDC) use cases and identified legal,
regulatory, technical and operational issues warranting
further consideration in future research. The RBA’s review
of these matters remains ongoing. As part of its multi-
stage reform agenda, the Australian Government recently
completed consultations on token mapping and on the
licensing of payment service providers to help formulate
an appropriate regulatory framework for the crypto and
digital assets ecosystem in Australia. A draft Digital Assets
(Market Regulation) Bill 2023 was referred to the Senate
Economics Legislation Committee which recommended
the bill not be passed. Regulation of digital assets is
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The Group regularly considers a range of corporate
opportunities, including acquisitions, divestments, joint
ventures, and investments.
Pursuit of corporate opportunities inherently involves
transaction risks, including the risk that the Group over-
values an acquisition or investment, or under-values a
divestment, as well as exposure to reputational damage or
regulatory intervention. The Group may encounter difficulties
in integrating or separating businesses, including failure to
realise expected synergies, disruption to operations, diversion
of management resources, or higher than expected costs.
These risks and difficulties may ultimately have an adverse
impact on the Group’s financial performance and position.
The Group may incur unexpected financial losses following
an acquisition, joint venture, or investment if the business
it invests in does not perform as planned or causes
unanticipated changes to the Group’s risk profile. Additionally,
there can be no assurance that customers, employees,
suppliers, counterparties, and other relevant stakeholders will
remain with an acquired business following the transaction,
and any failure to retain such stakeholders may have an
adverse impact on the Group’s overall financial performance
and position.
Risks related to the Company’s acquisition of Citigroup’s
Australian consumer business which completed on 1 June 2022
continue to exist.
The Company continues to rely on Citigroup’s regional shared
technology infrastructure for transitional services (and will
do so through the transition period), as well as Citigroup’s
support for data migration activities after the development of
technology systems within the Group. There is a risk that as
the integration project and the development of technology
systems within the Group continues, costs may be higher
than anticipated, more internal resourcing is required than
anticipated, or that key employees, customers, suppliers, or
other stakeholders required for a successful transition, will
not be retained. Additionally, there is a risk that the timeline
Risk factors (cont.)
for the integration is extended, which may result in further
costs being incurred by the Company.
Citigroup has provided the Company with indemnities relating
to certain matters which may have occurred pre-completion,
as well as covenants and warranties in favour of the Company.
There is a risk that these protections may be insufficient
to fully cover liabilities relating to these matters, which may
have an adverse impact on the Group’s financial performance
and position.
The Group may also have ongoing exposures to divested
businesses, including through a residual shareholding, the
provision of continued services and infrastructure, or an
agreement to retain certain liabilities of the divested
businesses through warranties and indemnities. These
ongoing exposures may have an adverse impact on the
Group’s business and financial performance and position. The
Group may also enter into non-compete arrangements as
part of divestments, which may limit the future operations of
the Group.
The Company completed the sale of its advice, platforms,
superannuation and investments and asset management
businesses to IOOF Holdings in May 2021, now named Insignia
Financial (MLC Wealth Transaction). As part of the MLC
Wealth Transaction, the Company provided Insignia Financial
with indemnities relating to certain pre-completion matters,
including a remediation program relating to workplace
superannuation matters, breaches of anti-money laundering
laws and regulations, regulatory fines and penalties, and
certain litigation and regulatory investigations. The Company
also provided covenants and warranties in favour of Insignia
Financial. A breach or triggering of these contractual
protections may result in the Company being liable to
Insignia Financial.
As part of the MLC Wealth Transaction, the Company retained
the companies that operated the advice businesses, such
that the Group has retained all liabilities associated with
the conduct of these businesses pre-completion. From
completion, the Company has agreed to provide Insignia
Financial with certain transitional services and continuing
access to records, as well as support for data migration
activities. The Company may be liable to Insignia Financial if
it fails to perform its obligations. There is a risk that costs
associated with separation activities and the costs incurred
by the Company in satisfying its obligations may be higher
than anticipated. If so, or if the Company fails to perform its
obligations, there may be an adverse impact on the Group’s
financial performance and position.
On 17 November 2022, the Company announced its intention
to exit its custody business, NAB Asset Servicing. The exit is
expected to be effected through the transfer of all of NAB
Asset Servicing’s clients to alternative custody providers over
a period of approximately three years. The transfer of all
clients over a relatively short period is a complex exercise
that is subject to operational/transitional risks that will need
to be managed carefully. There is a risk that this does not
occur to plan, and that there may be a potential adverse
impact on the Group if not managed appropriately.
Credit risk
Credit risk is the risk that a customer will fail to meet their
obligations to the Group in accordance with agreed terms.
Credit risk arises from both the Group’s lending activities and
markets and trading activities.
Elevated interest rates to combat persistent inflation may
result in deterioration in the Group's credit risk profile in the
short term through increases in defaulted loans.
Globally, central banks (including in Australia and NZ) have
rapidly increased policy rates in response to elevated levels
of inflation.
Inflation remains high and above the targets of many central
banks, including those in the locations in which the Group
operates. This may increase the risks arising from further rate
rises in 2023 and beyond, or from elevated rates, relative to
recent historical levels, persisting.
Elevated interest rates, coupled with existing inflationary
pressures, may increase household and business financial
stress across Australia and NZ, particularly for underprepared
customers. Higher rates typically lead to reduced disposable
income for households leaving sectors exposed to changes
in household discretionary spending (including retail trade,
tourism, hospitality, and personal services) vulnerable to
significant financial stress in the event of changes to
consumer spending behaviour. This includes a heightened
risk of corporate and business bankruptcies, job losses and
higher unemployment, particularly in the event of an economic
slowdown. The increased credit risk in affected sectors and
elevated levels of household and business financial stress
may result in an increase in losses if customers default
on their loan obligations and/or higher capital requirements
through an increase in the probability of default.
A decline in property market valuations may give rise to
higher losses on defaulting loans.
Lending activities account for most of the Group’s credit risk
exposure. The Group’s lending portfolio is largely based in
Australia and NZ. Residential housing loans and commercial
real estate loans constitute a material component of the
Group’s total gross loans and acceptances.
The Group may have higher credit risk, or experience higher
credit losses, to the extent its loans are concentrated by
loan type, industry segment, borrower type, or location of the
borrower or collateral. For example, the Group’s credit risk
and credit losses can increase if borrowers who engage in
similar activities are uniquely or disproportionately affected
by extreme weather events, economic or market conditions,
or by regulation, such as regulation related to climate
change. Deterioration in economic conditions or real estate
values in Australia and NZ, where the Group has relatively
larger concentrations of lending, including for residential or
commercial real estate, could result in higher credit losses
and costs.
Residential and commercial property prices in Australia and
NZ increased for some years up until 2021, but experienced
decline in 2022 following the central banks’ moves to increase
policy rates. House prices have stabilised to date in 2023,
with some markets recording price increases, however the
recovery has not covered the declines experienced in
2022. Any declines in the value of residential or commercial
property used as collateral (including in business lending)
may give rise to greater losses to the Group resulting from
customer defaults. This may, in turn, impact the Group’s
financial performance and position, profitability and returns to
investors. The most significant impact, in the event of default,
is likely to come through residential mortgage customers in
high loan-to-value-ratio brackets.
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Risk factors (cont.)
Adverse business conditions in Australia and New Zealand,
particularly in the agricultural sector, may give rise to
increasing customer defaults.
The Group has a large market share among lenders to the
Australian and NZ agricultural sectors. These sectors may be
negatively impacted by several factors, including:
• Vulnerability to labour constraints.
• Trade restrictions and tariffs.
• Volatility in commodity prices (particularly agricultural
product prices).
•
Foreign exchange rate movements.
• Changes in consumer preference.
• Disease and introduction of pathogens and pests (for
example the threat of a local foot and mouth disease
outbreak and spread in Australia of the varroa mite –
impacting European honey bees).
• Export and quarantine restrictions.
• Supply chain constraints.
factors, such as: economic growth rates, environmental and
social issues (including emerging issues such as modern
slavery and nature-related risks), cost and availability of
capital, central bank intervention, inflation and deflation rates,
level of interest rates, yield curves, market volatility, and
uncertainty. Deterioration in any of these factors may lead to
the following negative impacts on the Group:
• Deterioration in the value and liquidity of assets
(including collateral).
• The inability to price certain assets.
• Environmental conditions and social and governance
issues impacting the risk and return profile and/or value of
customers’ security or business operations.
• An increase in customer or counterparty default and
credit losses.
• Higher provisions for credit impairment.
• Mark-to-market losses in equity and trading positions,
including the Company's high-quality liquid asset
(HQLA) portfolios.
• Extreme weather events (including substantial rainfall
• A lack of available or suitable derivative instruments for
or drought).
Increasing weather volatility.
Longer-term changes in climatic conditions.
•
•
Some customers are facing significant challenges from
extreme weather events such as the floods in NZ in 2023,
Australian bushfires in 2019/20 and floods in New South Wales
(NSW) and Queensland (2022 and 2023), which caused stock,
crop and plant and equipment loss and damage. These events,
combined with changes to future insurance affordability and
availability, may result in increased losses to the Group from
customer defaults, and ultimately may have an adverse impact
on the Group’s financial performance and position. More
broadly, physical and transition risks associated with climate
change may also increase current levels of customer defaults
in other sectors.
Adverse business conditions (including supply chain
disruptions, labour constraints and rising input costs, including
from volatile commodity and energy prices and the impact of
rapid technological change) may also lead to stress in certain
other sectors such as construction, wholesale trade and
manufacturing. Rising household financial pressures (including
inflationary pressures) also pose a risk to sectors that are
reliant on household expenditure.
•
Market declines and increased volatility may result in the
Group incurring losses.
Some of the Group’s assets and liabilities comprise financial
instruments that are carried at fair value, with changes
in fair value recognised in the Group’s income statement.
Movements in interest rates can affect prepayment
assumptions and thus fair value. Market declines and
increased volatility could negatively impact the value of such
financial instruments and cause the Group to incur losses.
Other macro-economic, geopolitical, climate, other nature-
related or social risks may adversely affect the Group and
pose a credit risk.
The majority of the Group's businesses operate in Australia
and NZ, with additional operations located in Asia, the United
Kingdom, France and the US. Levels of borrowing are heavily
dependent on customer confidence, employment trends,
market interest rates, and other economic and financial
market conditions and forecasts.
Domestic and international economic conditions and
forecasts are influenced by a number of macro-economic
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hedging purposes.
•
Increased cost of insurance, lack of available or suitable
insurance, or failure of the insurance underwriter.
Economic conditions may also be negatively impacted by
climate change and major shock events, such as natural
disasters, epidemics and pandemics, war and terrorism,
cyber-attacks, political and social unrest, banking instability
and sovereign debt restructuring and defaults.
The following macro-economic and financial market
conditions are, as of the date of this Report, of most
relevance to the credit risk facing the Group and may affect
revenue growth and/or customer balance sheets:
• Global economic growth has slowed to date in calendar
year 2023, consistent with expectations of below average
growth in both calendar years 2023 and 2024. Weaker
economic conditions reflect the impact of tightening
monetary policy and lending standards, particularly in
advanced economies, along with energy disruptions in
Europe and weak growth rates in China. The risk of
recessions in one or more major economies in calendar
year 2024 remains.
Inflationary pressures emerged at the start of calendar
year 2021 and have continued through calendar year 2023,
increasing the cost of living and reducing disposable
income for consumers. The lift in inflation reflected a broad
range of factors, including the impact of fiscal stimulus
in a range of countries, disruptions to global supply
chains, shortages of key inputs, commodities, and labour
in various locations and the impact of the Russia-Ukraine
conflict. The conflict in Israel-Palestine will also likely
impact inflation, particularly through the impact on global
commodity prices, most notably oil. Although inflation has
slowed in calendar year 2023 to date, it remains above the
targets set by most major central banks.
• Persistent inflation and fears that households’ inflation
expectations could become unanchored from central bank
targets (driving increased wage demands) drove global
central banks (including in Australia and NZ) to rapidly lift
policy rates starting in early 2022 and this trend continued
in 2023. Market pricing suggests most major central banks
are either at or near the peak of the rate cycle, although
forward guidance from these banks indicates that they still
have a tightening bias (indicating that policy rates could
rise further should the current slowing in inflation falter).
Risk factors (cont.)
• A sustained period of increased policy rates, and/or
further increases in rates, accompanied by tighter lending
standards in many countries, may expose imbalances or
weaknesses in balance sheets, including those of financial
institutions, and asset markets that have built up over
time. This may increase pressure on borrowers, particularly
those that are highly geared and/or face reduced income
due to weaker economic activity. Where concerns over
the viability of financial institutions arise, it can trigger
contagion fears, potentially destabilising global markets
and, in turn, negatively affecting economic activity. More
generally, higher policy rates may adversely affect the
Group’s cost of funds, trading income, margins and the
value of the Group’s lending and investments.
• Risk of contagion due to financial system instability
remains an ongoing concern for the Group due to the
interdependency of financial market participants. Where
concerns over the viability of financial institutions arise, it
can trigger contagion fears, potentially destabilising global
markets and, in turn, negatively affecting economic activity
and adversely affecting the Group’s results.
• China is a major trading partner for Australia and NZ,
with export incomes and business investment exposed to
changes in China’s economic growth and trade policies.
China’s economic growth slowed in the June quarter of
2023, pointing to the loss of momentum in China’s post-
zero-COVID recovery – with domestic demand remaining
subdued. There remains considerable uncertainty around
household consumption and the property sector in China
(including as a result of defaults by major property
developers), which could negatively impact the global
economy generally, and the Australian and NZ economy
in particular (including by reducing demand for Australian
and NZ exports). A range of medium to longer-term risks
also continue to be present, including high corporate
debt levels and demographic pressures from China’s
ageing population. Although diplomatic tensions between
the Chinese and Australian governments appear to have
eased since mid-calendar year 2022, the risk of trade
restrictions being imposed on Australian exports remains.
Such restrictions could have a negative impact on the
Group’s customers and may give rise to increasing levels
of customer defaults.
• As commodity exporting economies, Australia and NZ are
exposed to shifts in global commodity prices that can
be sudden, sizeable, and difficult to predict. Fluctuations
in commodity markets can affect key economic variables
like national income tax receipts and exchange rates.
Commodity price volatility remains substantial and, given
the Group’s sizeable exposures to commodity producing
and trading businesses, this volatility poses a credit risk to
the Group.
• Ongoing geopolitical instability, such as that caused by
the ongoing conflict between Russia and Ukraine, has
negatively impacted, and could in the future negatively
impact, the global and Australian economies, including
by causing supply chain disruptions, rising prices for oil
and other commodities, volatility in capital markets and
foreign currency exchange rates, rising interest rates and
heightened cybersecurity risks. In response to the Russia-
Ukraine conflict, several countries (including Australia and
NZ) imposed wide ranging economic sanctions and export
controls on individuals and firms closely connected to the
Russian Government or conducting economic activity in
certain regions of Ukraine. These sanctions, as well as
responsive measures, continue to impact the European
and global economy, including through volatile energy
and commodity prices. Prices may remain elevated for
an extended period, which would negatively impact most
businesses and households, and may lead to increased
credit losses for the Group.
• Other geopolitical risks continue to present uncertainty
to the global economic outlook, with negative impacts on
consumption and business investment. Tensions between
the US and China, including in relation to Taiwan, the Russia-
Ukraine conflict and China’s trade and technology policies,
continue to persist, which could impact global economic
growth and global supply chains. Similarly, geopolitical
tensions in the Asia-Pacific region could increase as a
result of the AUKUS pact or other similar agreements.
The possibility of the war between Israel and Hamas
expanding to become a wider regional conflict in the
Middle East, poses a fresh threat to the global economy
including potential implications for energy prices, inflation
and confidence levels.
Market risk
The Group may suffer losses as a result of a change in
the value of the Group’s positions in financial instruments,
bank assets and liabilities, or their hedges due to adverse
movements in market prices. Adverse price movements
impacting the Group may occur in credit spreads, interest
rates, foreign exchange rates, and commodity and equity
prices, particularly during periods of heightened market
volatility or reduced liquidity. Market volatility has increased
in response to increased geopolitical risk, rising inflation and
central banks lifting interest rates.
The occurrence of any event giving rise to material market risk
losses may have a negative impact on the Group’s financial
performance and position.
The Group is exposed to credit spread risk.
Credit spread risk is the risk that the Group may suffer
losses from adverse movements in credit spreads. This is a
significant risk in the Group’s trading and banking books.
The Group’s trading book is exposed to credit risk movements
in the value of securities and derivatives as a result of
changes in the perceived credit quality of the underlying
company or issuer. Credit spread risk accumulates in the
Group’s trading book when it provides risk transfer services
to customers seeking to buy or sell fixed income securities
(such as corporate bonds). The Group may also be exposed
to credit spread risk when holding an inventory of fixed
income securities in anticipation of customer demand or
undertaking market-making activity (i.e., quoting buy and
sell prices to customers) in fixed income securities. The
Group’s trading book is also exposed to credit spread risk
through credit valuation adjustments. A widening of credit
spreads could negatively impact the value of the credit
valuation adjustments.
The Group’s banking book houses the Group’s liquidity
portfolio. While the Group hedges the interest rate risk on this
portfolio, it is subject to credit spread risk through changes
in spreads on its holdings of semi-government bonds. These
positions form part of the required holdings of HQLAs used
in managing the Group’s liquidity risk and can give rise to
material profit and loss volatility within the Group’s Treasury
portfolio during periods of adverse credit spread movements.
Positions in Residential Mortgage-Backed Securities that
arise through the Group’s warehousing, underwriting, and
syndication operations also form part of the banking book and
are exposed to changes in credit spreads.
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Risk factors (cont.)
The Group is exposed to interest rate risk.
The Group's financial performance and capital position are
impacted by changes in interest rates.
The Group’s trading book is exposed to changes in the
value of securities and derivatives as a result of changes
in interest rates. The Group’s trading book accumulates
interest rate risk when the Group provides interest rate
hedging solutions for customers, holds interest rate risk in
anticipation of customer requirements, or undertakes market-
making activity in fixed income securities or interest rate
derivatives. The level of volatility in interest rate markets has
increased in the post-pandemic period after a broadening
of inflationary pressures saw major central banks unwind
stimulus and rapidly tighten monetary policy. Market volatility
has increased in response to increased geopolitical risk, rising
and sustained inflation, central banks lifting interest rates and
other macroeconomic risks.
Balance sheet and off-balance sheet items can create an
interest rate risk exposure within the Group. As interest rates
and yield curves change over time, the Group may be exposed
to a loss in earnings and economic value due to the interest
rate profile of its balance sheet. Such exposure may arise
from a mismatch between the maturity profile of the Group’s
lending portfolio compared to its deposit portfolio (and other
funding sources), as well as the extent to which lending
and deposit products can be repriced should interest rates
change, thereby impacting the Group’s net interest margin.
The Group is exposed to foreign exchange risk.
Foreign exchange risks are evident in the Group’s trading and
banking books.
Foreign exchange and translation risks arise from the impact
of currency movements on the value of the Group’s positions
in financial instruments, profits and losses, and assets and
liabilities due to participation in global financial markets and
international operations.
The Group’s ownership structure includes investment in
overseas subsidiaries and associates which gives rise to
foreign currency exposures, including through the repatriation
of capital and dividends. The Group’s businesses may
therefore be affected by a change in currency exchange
rates, and movements in the mark-to-market valuation of
derivatives and hedging contracts.
The Group’s financial statements are prepared and presented
in Australian dollars unless otherwise stated, and any adverse
fluctuations in the Australian dollar against other currencies
in which the Group invests or transacts, and generates
profits (or incurs losses), may adversely impact its financial
performance and position.
The Group is exposed to market risk should it be unable to
sell down its underwriting risk.
As financial intermediaries, members of the Group underwrite
or guarantee different types of transactions, risks and
outcomes, including the placement of listed and unlisted debt,
equity-linked and equity securities. The underwriting obligation
or guarantee may be over the pricing and placement of
these securities, and the Group may therefore be exposed
to potential losses, which may be significant, if it fails to sell
down some or all of this risk to other market participants.
Capital, funding and liquidity risk
The Group is exposed to funding and liquidity risk.
Liquidity risk is the risk that the Group is unable to meet its
financial obligations as they fall due. These obligations include
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the repayment of deposits on demand or at their contractual
maturity, the repayment of wholesale borrowings and loan
capital as they mature, the payment of interest on borrowings
and the payment of operational expenses and taxes. The
Group must also comply with prudential and regulatory liquidity
obligations across the jurisdictions in which it operates.
Any significant deterioration in the Group’s liquidity position
may lead to an increase in the Group’s funding costs,
constrain the volume of new lending or cause the Group to
breach its prudential or regulatory liquidity obligations. This
may adversely impact the Group’s reputation and financial
performance and position
Funding risk is the risk that the Group is unable to raise short
and long-term funding to support its ongoing operations,
regulatory requirements, strategic plans, and objectives. The
Group accesses domestic and global capital markets to help
fund its business, along with using customer deposits. The
final maturity dates of the additional and Supplementary
Allowance of the drawn Term Funding Facility (TFF) (a three-
year facility established by the RBA to support lending to
the Group’s customers) are concentrated during 2024 for
all participating Authorised Deposit-taking Institutions (ADIs)
including the Group (the Initial Allowance matured in 2023).
The Group relies on offshore wholesale funding to support its
funding and liquidity position. Periods of heightened market
volatility may limit the Group’s access to this funding source.
Disruption in global capital markets, reduced investor interest
in the Group’s securities and/or reduced customer deposits,
may adversely affect the Group’s funding and liquidity position.
This may increase the cost of obtaining funds, reduce the
tenor of available funds or impose unfavourable terms on the
Group’s access to funds, constrain the volume of new lending,
or adversely affect the Group’s capital position.
The Group’s capital position may be constrained by
prudential requirements.
Capital risk is the risk that the Group does not hold sufficient
capital and reserves to cover exposures and to protect
against unexpected losses. Capital is the cornerstone of the
Group’s financial strength. It supports the Group’s operations
by providing a buffer to absorb unanticipated losses from
its activities.
The Group must comply with prudential requirements in
relation to capital across the jurisdictions in which it operates.
Compliance with these requirements, and any further changes
to these requirements may:
•
•
Limit the Group’s ability to manage capital across the
entities within the Group.
Limit payment of dividends or distributions on shares and
hybrid instruments.
• Require the Group to raise more capital (in an absolute
sense) or raise more capital of higher quality.
• Restrict balance sheet growth.
Current regulatory changes that could present a risk to the
Group’s capital position include loss-absorbing requirements
for Domestic Systemically Important Banks (D-SIBs), which
include the Group. These changes require an increase to total
capital by 4.5% of risk weighted assets (RWA) by 1 January 2026,
with an interim increase by 3% of RWA by 1 January 2024. These
requirements are expected to be satisfied primarily through
the issue of additional Tier 2 Capital which will further increase
the Group’s funding costs due to the higher cost of Tier 2
Capital issuance relative to senior debt.
On 21 September 2023, APRA released a Discussion Paper,
outlining potential options for, and seeking feedback from
stakeholders on, improving the effectiveness of Additional
Risk factors (cont.)
Tier 1 (AT1) capital in Australia. APRA intends to follow
this process with a formal consultation in 2024 on any
proposed amendments to prudential standards. Changes to
the requirements for AT1 capital may impact the Group’s
capital position.
In addition, revisions to the Reserve Bank of New Zealand
capital requirements (to be phased in by 2028) will require the
Group to hold more capital in NZ.
If the information or the assumptions upon which the Group’s
capital requirements are assessed prove to be inaccurate,
this may adversely impact the Group’s operations, financial
performance and financial position.
A downgrade in the Group’s credit ratings or outlook
may adversely impact its cost of funds and capital
market access.
Credit ratings are an assessment of a borrower’s
creditworthiness and may be used by market participants
in evaluating the Group and its products, services, and
securities. Credit rating agencies conduct ongoing review
activities, which can result in changes to credit rating settings
and outlooks for the Group, or credit ratings of sovereign
jurisdictions where the Group conducts business. Credit
ratings may be affected by operational and other market
factors (e.g. ESG-related), or changes in a credit rating
agency’s rating methodologies.
A downgrade in the credit ratings or outlook of the Group,
the Group’s securities, or the sovereign rating of one or
more of the countries in which the Group operates, may
increase the Group’s cost of funds or limit its access to
capital markets. This may also cause a deterioration of
the Group’s liquidity position and trigger additional collateral
requirements in derivative contracts and other secured
funding arrangements. A downgrade to the Group’s credit
ratings relative to its peers may also adversely impact
the Group’s competitive position and financial performance
and position.
Operational risk
Operational risk is the risk of loss resulting from inadequate
or failed internal processes, people and systems or external
events. This includes legal risk but excludes strategic risk.
Disruption to technology may adversely impact the Group’s
reputation and operations.
Most of the Group’s operations depend on technology
and therefore the reliability, resilience, and security of the
Group’s (and its third- party vendors’) information technology
systems and infrastructure are essential to the effective
operation of the Group’s business and consequently to its
financial performance and position. The reliability, security and
resilience of the Group’s technology may be impacted by the
complex technology environment, failure to keep technology
systems up-to-date, an inability to restore or recover systems
and data in acceptable timeframes, or a physical or cyber-
attack against the Group or its external providers including
suppliers of cloud services to the Group.
The rapid evolution of technology in the financial services
industry and the increased expectations of customers for
internet and mobile services on demand expose the Group to
changing operational scenarios.
Any disruption to the Group’s technology (including disruption
to the technology systems of the Group’s external providers)
may be wholly or partially beyond the Group’s control and
may result in operational disruption, regulatory enforcement
actions, customer redress, litigation, financial losses, theft or
loss of customer data, loss of market share, loss of property
or information, or may adversely impact the Group’s speed
and agility in the delivery of change and innovation.
In addition, any such disruption may adversely affect the trust
that internal and external stakeholders have in the Group’s
ability to protect key information (such as customer and
employee records) and infrastructure. This may in turn affect
the Group’s reputation, which may result in loss of customers,
a reduction in share price, ratings downgrades and regulatory
censure or penalties.
Privacy, information security and data breaches may
adversely impact the Group’s reputation and operations.
The Group collects, processes, stores and transmits large
amounts of personal and confidential information through its
people, technology systems and networks and the technology
systems and networks of its external service providers.
Threats to information security are constantly evolving and
techniques used to perpetrate cyber-attacks are increasingly
sophisticated. In addition, the number, nature and resources
of adverse actors that could pose a cyber threat to the Group
is growing, including individual cybercriminals, criminal or
terrorist syndicate networks and large sophisticated foreign
governments with significant resources and capabilities.
There is a risk that the Group’s efforts to improve its
technology systems and networks and its information security
policies, procedures and controls may not be adequate to
address these threats. While the Group participates in internal
and external reviews and testing and is subject to regulatory
oversight, which collectively helps to identify weaknesses
and areas for improvement, remediation of weaknesses
is sometimes difficult to complete in a timely manner
due to the complex technology environment (including
third party involvement) and the rapidly evolving nature of
the threats, which leads to the continuing emergence of
new vulnerabilities.
As cyber threats continue to evolve, the Group may
be required to expend significant additional resources
to continue to modify or enhance its layers of
defence or to investigate and remediate any information
security vulnerabilities.
The Group may also not always be able to anticipate a security
threat, or be able to implement effective information security
policies, procedures, and controls to prevent or minimise
the resulting damage. The Group may also inadvertently
retain information which is not specifically required or is
not permitted by legislation, thus increasing the impact of a
potential data breach or non-compliance. A successful cyber-
attack could persist for an extended period before being
detected and, following detection, it could take considerable
time for the Group to obtain full and reliable information about
the cybersecurity incident and the extent, amount and type of
information compromised. During an investigation, the Group
may not necessarily know the full effects of the incident or
how to remediate it, and actions and decisions that are taken
or made in an effort to mitigate risk may further increase
the costs and other negative consequences of the incident.
Moreover, the Group may be required to disclose information
about a cybersecurity event before it has been resolved
or fully investigated. Additionally, the Group uses select
external providers (in Australia and overseas) to process
and store confidential data and to develop and provide its
technology services, including the increasing use of cloud
infrastructure. While the Group negotiates comprehensive
risk-based controls with its service providers, it is limited in
its ability to monitor and control the security protocols that
service providers implement on a day-to-day basis. The Group
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Risk factors (cont.)
may also submit confidential information to its key regulators
under a legal obligation and as part of regulatory reporting.
A breach of security at any of these external providers,
regulators or within the Group may result in operational
disruption, theft or loss of customer or employee data, a
breach of privacy laws, regulatory enforcement actions, civil
penalties, customer or employee redress, litigation, financial
losses, or loss of market share, property, or information.
This may be wholly or partially beyond the control of the
Group and may adversely impact its financial performance
and position. For example, some large Australian organisations
have experienced significant cyber-attacks in recent years
leading to intense public reactions and increased political and
regulatory focus.
In addition, any such event may give rise to increased
regulatory scrutiny or adversely affect the view of ratings
agencies. Social media commentary, and the Group’s
responses to the relevant event, may exacerbate the impact
on the Group’s reputation.
The threat environment has also seen a new vector appear in
the form of generative AI, the threat of which is uncertain, but
which is a step-change in AI. While generative AI has potential
to support significant service advances for customers, it
also has potential to assist and enable and enhance existing
methods for criminals to perpetrate fraud, scams, and cyber
threats against the Company and its customers.
Complexity of infrastructure, processes and models, gives
rise to a significant risk to the Group’s operations.
The Group’s business involves the execution of many
processes and transactions with varying degrees of
complexity. The Group is reliant on its policies, processes,
controls, and supporting infrastructure functioning as
designed, and on third parties appropriately managing their
own operational risk and delivering services to the Group
as required. A failure in the design or operation of these
policies, processes, controls, and infrastructure, failure of
the Group to manage external service providers, or the
disablement of a supporting system, all pose a significant
risk to the Group’s operations and consequently its financial
performance, reputation and the timeliness and accuracy of
its statutory and prudential reporting.
Models are used extensively in the conduct of the Group’s
business, for example, in calculating capital requirements
or customer compensation payments, and in measuring
and stressing exposures. If the models used prove to
be inadequate, or are based on incorrect or invalid
assumptions, judgements or inputs, this may adversely affect
the Group’s customers and the Group’s financial performance
and position.
The Group is exposed to the risk of human error.
The Group’s business, including the internal processes
and systems that support business decisions, relies on
appropriate actions and inputs from its employees, agents,
and external providers. The Group is exposed to operational
risk due to process or human error, including incorrect
or incomplete data capture and records maintenance,
incorrect or incomplete documentation to support activities,
or inadequate design of processes or controls. The Group
uses select external providers (in Australia and overseas) to
provide services to the Group and is exposed to similar risks
arising from such failures in the operating environment of its
external providers.
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The materialisation of any of these risks could lead to direct
financial loss, loss of customer, employee or commercially
sensitive data, regulatory penalties, and reputational damage.
The Group may not be able to attract and retain
suitable talent.
The Group is dependent on its ability to attract and retain
key executives, employees, and Board members with a deep
understanding of banking and technology, who are qualified
to execute the Group’s strategy, including the technology
transformation the Group is undertaking to meet the changing
needs of its customers. Potential weaknesses in employment
practices, including diversity, anti-discrimination, workplace
flexibility, payroll compliance, workplace health and safety
and employee wellbeing, together with a competitive labour
market for critical skills, are sources of operational risk that
can impact the Group’s ability to attract and retain qualified
personnel with the requisite knowledge, skills and capability.
The effective management of psychosocial risk (including
relating to workplace factors such as customer aggression,
workload issues or poor change management) is an area of
focus within the Group to support colleague wellbeing and
retain talent. It is also an area of increasing regulatory scrutiny
and reputational risk.
The Group’s capacity to attract and retain key talent, in
addition to providing attractive career opportunities, also
depends on its ability to design and implement effective
remuneration and talent structures. This may be constrained
by several factors, including by regulatory requirements
(particularly in the highly regulated financial services sector).
The unexpected loss of key resources or the inability to
attract personnel with suitable experience may adversely
impact the Group’s ability to operate effectively and
efficiently, or to meet the Group’s strategic objectives. This
risk may also impact third party vendors (including offshore
vendors) engaged by the Group, who may be experiencing
similar personnel related challenges.
External events may adversely impact the
Group’s operations.
Operational risk can arise from external events such
as biological hazards, climate change, natural disasters,
widespread disease or pandemics, or acts of terrorism and
geopolitical conflict.
The Group has branches across Australia in locations that are
prone to seasonal natural disasters. Recent examples are
the bushfires over the 2019/2020 summer period in NSW and
Victoria, and severe flooding events in Eastern Australia in 2021
and 2022 and North-Eastern Australia in 2023. In addition, the
Group has branches and office buildings in NZ, which is prone
to extreme weather events and has experienced significant
flooding and earthquakes in recent years, as well as a severe
and damaging tropical cyclone in February 2023, and which
may be exposed to the risk of future extreme weather events
and earthquakes.
Given the Group’s physical presence in major cities in
Australia, NZ and other countries where it has, or is intending
to establish, offshore operations, it may also be exposed to
the risk of a terrorist attack.
The Group has operations in India and Vietnam conducting a
range of essential business functions and processes including
transaction processing and technology development.
Disruption to these centres may have a material impact on
the Group’s operations.
Geopolitical risks continue to present uncertainty to the
Group’s operations. Tensions between the US and China,
Risk factors (cont.)
including in relation to Taiwan, the Russia-Ukraine and
Israel-Gaza conflicts and China’s trade and technology
policies, continue to persist, which could impact the Group’s
operations adversely, for example through disruption to global
supply chains and availability of talent.
External events, such as extreme weather, natural disasters,
biological hazards, and acts of terrorism may cause property
damage and business disruption, which may adversely impact
the Group’s financial performance. In addition, if the Group is
unable to manage the impacts of such external events, it may
compromise the Group’s ability to provide a safe workplace
for its personnel and/or lead to reputational damage. The
environment the Group is operating in has become more
complex and more uncertain and could create operational
risks that are yet to be identified.
Sustainability risk
Sustainability risk is the risk that ESG-related events
or conditions arise that could negatively impact the
sustainability, resilience, risk and return profile, value, or
reputation of the Group or its customers and suppliers.
Inadequate management of ESG risks by the Group or its
customers may expose the Group to other potential risks
across risk categories such as strategic, credit, compliance,
conduct, operational risk and capital, funding and liquidity risk.
Physical and transition risks arising from climate change,
other environmental impacts and nature-related risks may
lead to increasing customer defaults and decrease the
value of collateral.
Extreme weather, increasing weather volatility, and longer-
term changes in climatic conditions, as well as environmental
impacts such as land contamination and other nature-related
risks such as deforestation, biodiversity loss and ecosystem
degradation, may affect water security, property and asset
values or cause customer losses due to damage, crop losses,
existing land use ceasing to be viable, and/or interruptions to,
or impacts on, business operations and supply chains.
Globally, an increasing number of countries are prone to, and
have experienced, acute physical climate events. In Australia
and NZ these have included drought conditions, bushfires over
summer periods, and severe floods, particularly in Eastern
Australia over the past three years including in 2023. NZ
also experienced a severe and damaging tropical cyclone
in February 2023. Extreme weather events are expected to
increase globally and locally in frequency and severity, which
may have adverse macroeconomic impacts. The impact of
extreme weather events can take time to be fully realised and
be widespread, extending beyond residents, businesses, and
primary producers in highly impacted areas, to supply chains
in other cities and towns relying on agricultural and other
products from within these areas. The impact of these losses
on the Group may be exacerbated by a decline in the value
and liquidity of assets held as collateral and the extent to
which these assets are insured or insurable, which may impact
the Group’s ability to recover its funds when loans default.
Climate-related transition risks are increasing as economies,
governments, and companies seek to transition to low-carbon
alternatives and adapt to climate change. Certain customer
segments may be adversely impacted as the economy
transitions to renewable and low-emissions technology.
Decreasing investor appetite and customer demand for
carbon intensive products and services, increasing climate-
related litigation, and changing regulations and government
policies designed to mitigate climate change, may negatively
impact revenue and access to capital for some businesses,
and/or the Group’s products or services that serve those
customers. Furthermore, management of transition risk is
more challenging given the presence of social risks such as
modern slavery in relevant supply chains e.g., input materials
and equipment required to support the low carbon transition.
NZ also faces geological risk associated with major
earthquakes and certain areas of Australia have also more
recently experienced some earthquake-related damage.
Nature-related risks (caused by impacts and dependencies
on nature), such as deforestation and illegal land clearing,
and biodiversity loss and ecosystem degradation, may
disrupt business activities and supply chains, and may cause
business impacts including contributing to raw material
and/or commodity price volatility, stranded assets, changes in
customer demand and changes in the regulatory environment.
Examples include: the decline of bee populations which
provide pollination services to agriculture, the collapse of
fishing or agricultural yields, and a decrease in air or
water quality.
These risks may increase expected and actual levels
of customer defaults, thereby increasing the credit risk
facing the Group and adversely impacting the Group’s
financial performance and position, profitability and returns
to investors.
The Group, its customers, or its suppliers may fail to comply
with legal, regulatory or voluntary standards or broader
shareholder, community and stakeholder expectations
concerning ESG risk performance.
ESG issues have been subject to increasing legal,
regulatory, voluntary, and prudential standards and increasing
(and sometimes differing) community and stakeholder
expectations. These include:
• Environmental issues – such as climate change,
deforestation and illegal land clearing, biodiversity loss,
ecosystem degradation, and pollution. Supervisory and
regulatory guidance and requirements for banks are
increasingly focusing on ESG risks, as regulators seek
to understand and manage system- wide impacts such
as those arising from climate-related risks. This focus is
quickly evolving to broader environmental issues, such
as nature-related risks, as the links between nature and
economic prosperity and societal wellbeing are becoming
better understood. This has been a particular focus of the
Task Force on Nature-related Financial Disclosures, whose
recommendations were released in September 2023, and
the development of which has been supported by the
Australian and United Kingdom governments.
• Social issues – such as human rights (including modern
slavery), compliance with recognised labour standards
and fair working conditions, unfair and inequitable
treatment of people including discrimination, product
responsibility, appropriate remuneration, and indigenous
land rights and cultural heritage including any such
potential impacts on these matters from a customer’s
operations and/or projects.
• Governance issues – such as bribery and corruption, tax
avoidance, greenwashing and other false or misleading
environmental or sustainability claims, poor governance,
lack of transparency, and not fulfilling accountabilities.
As certain issues become better understood and the
associated risks can be more accurately quantified,
corporate ESG commitments, and performance against those
commitments, are being more closely monitored by external
stakeholders. Globally, and particularly in Australia, regulators
have strengthened their policy guidance in relation to
sustainability-related disclosures and governance practices,
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Risk factors (cont.)
with particular emphasis on greenwashing. Consumer and fair-
trading issues in relation to environmental and sustainability
claims are a 2023-24 compliance and enforcement priority
of the Australian Competition and Consumer Commission
(ACCC), aimed at improving the integrity of environmental
and sustainability claims and to protect consumers from
greenwashing. Effective regulatory frameworks underpinning
sustainable finance continues to be a key theme and
strategic priority of the Australian Securities and Investments
Commission (ASIC) in 2023. In 2022, Australian regulators (in
particular, ASIC) increased enforcement activity in relation
to sustainability-related disclosures and that trend has
continued in 2023.
ESG due diligence requirements may become mandatory
in some jurisdictions in which the Group operates, placing
increasing demands on the Group’s processes and capability
to manage, monitor and address ESG risks.
The impacts associated with climate change-related
legislative and regulatory initiatives, customer requirements
and the transition to a low carbon economy, including meeting
new regulatory expectations, retrofitting of assets, energy
efficient and low carbon investments, purchasing carbon
credits or paying carbon taxes, may result in operational
changes and additional expenditures that could adversely
affect the Group and/or its customers.
The Group’s reputation and business prospects may also
be damaged if it does not, or is perceived not to,
effectively prepare for the potential business and operational
opportunities and risks associated with climate change,
including through the development and marketing of effective
and competitive products and services designed to address
clients’ climate risk-related needs. These risks include
negative market perception, reduced market share and
regulatory and litigation consequences associated with
greenwashing claims or driven by association with clients,
industries or products that may be inconsistent with the
Group’s stated positions on climate change issues.
Failure by the Group to:
• Comply with ESG-related regulatory requirements or
standards, including emerging ESG-related disclosure
requirements arising globally and following the release
of the International Sustainability Standards Board’s
Sustainability and Climate disclosure standards, the
proposed introduction of climate-related disclosure
requirements by the Australian Accounting Standards
Board, and recently introduced disclosure requirements in
NZ, related to the recommendations of the Task Force on
Climate-related Financial Disclosures.
• Meet ESG-related commitments, goals and targets set by
the Group, or Group ESG-related policies.
• Meet community and stakeholder expectations in relation
to ESG.
• Apply appropriate ESG standards to its customers, or to
entities in the Group’s supply chain.
Certain products, services or industries may become subject
to heightened public scrutiny, either generally or following
a specific adverse event, or because of activism by
shareholders, investors or special interest groups. This could
result in a sudden and significant decrease in demand for
these products or services and a negative impact on revenue
and access to capital for some businesses and increasing
litigation risk. Reputational damage to impacted suppliers,
customers or customer sectors may give rise to associated
reputational damage to the Group. In addition, levels of
customer defaults in an impacted sector may increase,
adversely impacting the Group’s financial performance and
position, profitability and returns to investors.
Conduct risk
Conduct risk is the risk that any action (or inaction) of the
Group, or those acting on behalf of the Group, will result in
unfair outcomes for any of the Group’s customers.
The Group is reliant on its employees, contractors and
external suppliers acting in an appropriate and ethical way.
Organisational culture can greatly influence individual and
group behaviours. Poor culture can expose an organisation
and lead to customer harm, financial loss and detriment.
The behaviours that could expose the Group to conduct
risk include:
•
Failure to design products and services that are
transparent, accessible, and easy for the Group’s
customers to understand.
• Unmanaged conflicts of interest that could influence
behaviour that is not in the customer’s best interest.
• Non-adherence to applicable learning and competency
training requirements.
• Selling, providing, or unduly influencing customers to
purchase or receive products or services that may not
meet their existing needs or that place the customer at
risk of future hardship.
• Use of Artificial Intelligence (AI) that is inappropriate or
inconsistent with community and customer expectations,
or the overreliance on algorithmic outcomes without
adequate human supervision.
• Making representations to customers about products or
services of the Group which are inaccurate, misleading
or deceptive, including representations which may mislead
customers on the extent to which the Group’s practices
are environmentally friendly, sustainable or ethical.
• Being a party to fraud.
•
Failure to protect customers from fraud or scams when
banking through digital channels or failure to respond
adequately to customers impacted by external fraud
or scams.
• Non-adherence to applicable requirements or providing
financial advice which is not appropriate or in a
customer’s interests.
• Appropriately make representations about its ESG-related
• Delays in appropriately escalating regulatory and
products and performance.
compliance issues.
may adversely impact the Group’s reputation, and
shareholder, customer and employee sentiment towards
the Group, may increase the risk of ESG-related litigation
against the Group, or may result in regulatory fines or
penalties, including litigation or regulatory action related
to green washing. Risk also exists due to well-funded and
strategic private litigants actively seeking opportunities to
take litigation action in Australia.
•
•
•
•
Failure to resolve issues and remediate customers
in a timely manner and in accordance with
community expectations.
Failure to deliver on product and service commitments.
Failure to remediate ineffective business processes and
stop re-occurrence of issues in a timely manner.
Failure to act in accordance with the Group’s Code of
Conduct or Financial Markets Conduct Policy.
98
National Australia Bank
Risk factors (cont.)
If the Group’s conduct related controls were to fail
significantly, be designed inappropriately, or not meet legal or
regulatory requirements or community expectations, then the
Group may be exposed to, among other things:
•
•
Increased costs of compliance, fines, additional
capital requirements, public censure, loss of customer
confidence, class actions and other litigation, settlements,
and restitution to customers or communities.
Increased supervision, oversight, or enforcement by
regulators or other stakeholders.
• Unenforceability of contracts such as loans, guarantees,
and other security documents.
• Enforced suspension of operations, amendments to
licence conditions, or loss of licence to operate all or part
of the Group’s businesses.
• Other enforcement or administrative action or agreements,
including legal proceedings.
A failure of the Group’s conduct-related controls to
accurately reflect relevant legal, regulatory or community
expectations may adversely impact the Group’s reputation,
financial performance and position, profitability, operations
and returns to investors and can result in customer harm,
financial loss and detriment.
Compliance risk
Compliance risk is the risk of failing to understand and comply
with relevant laws, regulations, licence conditions, supervisory
requirements, self-regulatory industry codes of conduct and
voluntary initiatives, as well as the internal policies, standards,
procedures, and frameworks that support fair and equitable
treatment of customers.
The Group may be involved in a breach or alleged breach of
laws governing bribery, corruption and financial crime.
Supervision and regulation of financial crime and enforcement
of anti- bribery and corruption (ABC), anti-money laundering
and counter-terrorism financing (AML/CTF) laws have
increased in recent years.
On 29 April 2022, the Company entered into an enforceable
undertaking (EU) with the Australian Transaction Reports and
Analysis Centre (AUSTRAC) to address AUSTRAC’s concerns
with the Group’s compliance with certain AML and CTF
requirements. Under the terms of the EU, the Company and
the relevant members of the Group are required to:
• Complete a Remedial Action Plan (RAP) approved
by AUSTRAC.
• Address, to AUSTRAC’s satisfaction, any deficiencies or
concerns with activities in the RAP identified by AUSTRAC.
In May 2022, the Company appointed an external auditor (as
required under the EU). The Company obtains interim reports
from the external auditor on a quarterly basis and an annual
basis. The external auditor will provide a final report to the
Company for the period up to 31 March 2025.
The Company has completed approximately three-quarters
of its required activities under the RAP. A number of these
activities require review by the External Auditor, and some
of the more complex activities under the RAP have longer
timeframes for completion. The Company continues to
oversee delivery of the RAP commitments through dedicated
EU Governance forums.
The Group continues to investigate and remediate a number
of known AML/CTF compliance issues and weaknesses,
including in accordance with the EU. As this work progresses,
further compliance issues may be identified and reported
to AUSTRAC or equivalent foreign regulators, and additional
enhancements of the Group’s systems and processes may
be required.
A negative outcome to any investigation or remediation
process, or a failure to comply with the EU, may adversely
impact the Group’s reputation, business operations, financial
position, and results.
As a bank engaged in global finance and trade, the
Group faces risks relating to compliance with AML/CTF, ABC
and financial sanctions laws across multiple jurisdictions.
Undetected failure of internal controls, or the ineffective
remediation of compliance issues could lead to breaches
of AML/CTF and/or ABC obligations or sanctions violations,
resulting in potentially significant monetary and regulatory
penalties, which, in turn, may adversely impact the Group’s
reputation, financial performance, and position.
The risks of sanctions violations are increased in the context
of additional, wide ranging economic sanctions and export
controls imposed in 2022 and 2023 as a result of the
Russia-Ukraine conflict and the continued attempts by those
subject to sanctions to evade and circumvent their impact.
NAB’s sanctions compliance function continues to monitor
the sanctions issued as a result of rising tensions in the
Middle East. NAB’s sanctions controls remain well equipped
to support compliance with new and anticipated sanctions
measures imposed by regulators. Refer to ‘Notes to the
Consolidated Financial Statements’ Note 31 Commitments and
Contingent liabilities, on page 233 in the Group’s 2023 Annual
Report, ‘Regulatory activity, compliance investigations and
associated proceedings – AML and CTF program uplift and
compliance issues’ for more information.
The Group may fail to comply with applicable laws and
regulations which may expose the Group to significant
compliance and remediation costs, regulatory enforcement
action or litigation, including class actions.
The Group is highly regulated and subject to various regulatory
regimes which differ across the jurisdictions in which it
operates, trades, and raises funds.
Ensuring compliance with all applicable laws is complex. There
is a risk the Group will be unable to implement the processes
and controls required by relevant laws and regulations in
a timely manner, or that the Group’s internal controls will
prove to be inadequate or ineffective in ensuring compliance.
There is also a potential risk of misinterpreting new or
existing regulations.
There is significant cost associated with the systems,
processes, controls, and personnel required to comply with
applicable laws and regulations. Such costs may negatively
impact the Group’s financial performance and position. Any
failure to comply with relevant laws and regulations may have
a negative impact on the Group’s reputation and financial
performance and position and may give rise to class actions,
litigation, or regulatory enforcement, which may in turn result
in the imposition of civil or criminal penalties, or additional
regulatory capital requirements, on the Group.
Entities within the Group have been, and may continue to
be, involved from time to time in regulatory enforcement
and other legal proceedings arising from the conduct of
their business. There is inherent uncertainty regarding the
possible outcome of any legal or regulatory proceedings
involving the Group. It is also possible that further class
actions, regulatory investigations, compliance reviews, civil
or criminal proceedings, or the imposition of new licence
conditions or regulatory capital requirements could arise in
relation to known matters or other matters of which the Group
2023 Annual Report
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Risk factors (cont.)
is not yet aware. The aggregate potential liability and costs
associated with legal proceedings cannot be estimated with
any certainty.
A negative outcome to regulatory investigations or litigation
involving the Group may impact the Group’s reputation,
divert management time from operations, and affect the
Group’s financial performance and position, profitability, and
returns to investors. Refer to ‘Notes to the Consolidated
Financial Statements’ Note 31 Commitments and Contingent
liabilities on pages 233 to 237 in the Group’s 2023 Annual
Report for details in relation to certain current legal and
regulatory proceedings, compliance reviews and associated
remediation, and other contingent liabilities which may impact
the Group.
Extensive regulatory change poses a significant risk to
the Group.
Globally, the financial services and banking industries are
subject to significant and increasing levels of regulatory
change, reviews and political scrutiny, including in Australia,
NZ and other countries where the Group has, or is intending to
establish, offshore operations.
Examples of regulatory change in other jurisdictions that may
directly or indirectly impact the Group’s Australian operations
include changes relating to the Group of 20 (G20) over-the-
counter derivative products, potential updates to the Foreign
Exchange Global Code, U.K. and European market abuse
regulations, European Union directives relating to Corporate
Sustainability Reporting and Corporate Sustainability Due
Diligence and the French Duty of Vigilance legislation. The
pace, volume, and complexity of change may also expose
the Group to the increased risk of failure to adequately
identify all applicable regulatory changes. Changes to laws
and regulations or their interpretation and application can
be unpredictable, are beyond the Group’s control, and may
not be harmonised across the jurisdictions in which the
Group operates.
Regulatory change may result in significant capital and
compliance costs, changes to the Group’s corporate
structure, and increasing demands on management,
colleagues and information technology systems. This may
also impact the competitiveness of the Group in certain of
its businesses, the viability of the Group’s participation in
certain markets or require the divestment of a part of the
Group’s business.
Operationalising large volumes of regulatory change presents
ongoing risks for the Group. Extensive work is done to assess
proposed design solutions and to test design effectiveness
of controls for each regulatory change before the effective
date, however, the operating effectiveness of some controls
cannot be fully tested until the go-live date for the relevant
regulatory change has occurred. There are also inherent risks
associated with the dependency on third parties for the
effectiveness of some controls.
The Group is in the process of implementing key regulatory
changes that have yet to take effect. These include
the Financial Accountability Regime Act 2023, Operational
Risk Management (CPS 230), Public Disclosure (APS 330)
and Recovery and Exit Planning (CPS 190). Other notable
changes which have taken effect recently include the
Compensation Scheme of Last Resort (which facilitates
payment of compensation for eligible consumers who have
received a determination from the Australian Financial Claims
Authority that remains unpaid) and ASIC’s Indigenous Financial
Services Framework (which aims to encourage financial
100 National Australia Bank
institutions to provide suitable products and services to First
Nations peoples).
Since coming into power in May 2022, the Australian
Government has released its inaugural Strategic Plan for
the Payments System, an initial Data and Digital Government
Strategy and a proposed 2023-2030 Australian Cyber Security
Strategy. It is also progressing discussions with the RBA on
recommendations from the Review of the Reserve Bank of
Australia which may have implications for the Group and
for the Australian economy. The Group will be subject to
significant regulatory and process changes as the Australian
Government finalises and implements its strategic policy
priorities and digitalisation agenda in the period ahead.
Ongoing and proposed regulatory changes, reviews and
inquiries relevant to the Group include operational resilience
(including cyber security), market risk capital reform, liquidity
reforms, CDR reforms (expansion to non-bank lenders, action
initiation, and consent), crypto assets (prudential treatment,
licensing and custody), governance, vulnerability (including
hardship, domestic violence, accessible and inclusive
banking and regional branch closures), financial claims
scheme, personal property securities framework reform,
financial advice reforms, market abuse or conduct-related
regulations, changes to financial benchmarks, derivatives
reform, modification of legislation applicable to deposit
takers in NZ, payments, data quality, protection and privacy
law reforms, competition inquiries (ACCC Retail Deposits
Inquiry, Treasury Review of Competition Policy Settings),
financial crime legislation (including de-banking), accounting,
disclosure and reporting requirements (financial, sustainability
and climate risk, reportable situations, complaints and
remuneration), bankruptcy and personal and corporate
insolvency, human rights, modern slavery, tax reform and the
Australian Securities Exchange CHESS replacement.
Current consumer-centric regulatory changes due to take
effect in the coming months include enhancements to the
Unfair Contract Terms (UCT) regime for consumers and small
businesses and the Banking Code of Practice. The changes
to UCT will allow Courts to impose substantial penalties on
businesses and individuals who include unfair terms in their
standard form contracts. Regulatory priorities may also direct
or influence the manner in which the Group is currently
meeting its obligations to customers.
With increasing evidence of consumers experiencing financial
distress and difficulty due to cost-of-living pressures, ASIC
expects lenders to work constructively with their customers
to find a sustainable solution in the period ahead. In addition,
ASIC’s strategic priority to take action to address poor
product design and distribution and poor consumer outcomes
is expected to drive both issuers’ and distributors’ focus
on the application of the ‘reasonable steps’ obligations to
ensure financial products are appropriately distributed to
their respective target markets.
Further inquiries and regulatory reviews impacting the
financial services industry may be commissioned by the
Australian and NZ governments, which, depending on their
scope, findings and recommendations, may adversely impact
the Group.
Examples of specific reviews and regulatory reforms currently
relevant to the Group, and which present a potential material
regulatory risk include those set out below.
• The Financial Markets (Conduct of Institutions) Amendment
Act 2022 (CoFI Act) will create an oversight and licensing
regime for regulating conduct in the banking, non-bank
deposit taking and insurance sectors in NZ. The CoFI Act
is expected to come into force in early 2025.
Risk factors (cont.)
•
Legislation was introduced into Parliament in November
2022 to enable ‘write access’ or ‘action initiation’ within
the CDR regime which may present additional cyber and
fraud risks in the CDR ecosystem, if passed. Governance
mechanisms including accountabilities, controls, and
frameworks are still evolving and, under the Open Banking
regime, customer data may be shared with, and received
from, a broader range of stakeholders. Significant Group
resources and management time have been, and will
continue to be, utilised to implement and progress Open
Banking (including supporting the CDR to mature in the
banking sector).
• At the direction of the Treasurer in February 2023, the ACCC
is conducting an inquiry into the market for the supply of
retail deposit products to ensure that there is competition
between Australian banks in relation to the pricing and
features of retail deposit products offered to customers.
The inquiry will look at matters including the interest rates
paid by ADIs for retail deposits, how the interest rates are
set between retail deposit products and lending products
(including home loans), decisions made in light of changes
to the RBA target cash rate, the extent of competition in
the market for retail deposit products and how deposit
products are a source of funding for the supply of credit.
The ACCC is to provide its report by 1 December 2023.
• Globally, regulators increasingly expect that the financial
services industry, including banks, will play a more
substantive role in protecting customers from scams and
other fraudulent activity. While recognising the potential
for regulatory change to address the impact of scams,
the Group continues to proactively educate its customers
about scams and further enhance its systems and
processes to detect and protect customers and the
Group from scams and fraud. In this way, the Group seeks
to mitigate the risk to customers from scam or fraud
activity that may be difficult for the Group to anticipate
or control. Although no government policy or position in
relation to a contingent reimbursement scheme has been
promulgated in Australia, the Group’s strategic planning and
enhancement of systems and processes will also prepare
it for expected regulatory change in this regard. Given
the considerable growth in industry and customer losses
from scams and fraud, the potential costs associated with
control failures and transferal of risk from the customer
may be significant.
• New Base Erosion and Profit Shifting rules (Pillar Two
model rules) have been released by the OECD that are
designed to ensure that multinational enterprises pay
a minimum tax of 15% tax on income arising in each
jurisdiction. The rules will come into effect for NAB globally
commencing 2025. The rules are complex and will require
global implementation resulting in increased compliance
costs. Substantial changes will be required to existing tax
operations with a focus on an increase in global data
analytics capabilities.
• Proposed ESG-related regulatory regimes, including
increasing obligations relating to modern slavery, human
rights, sustainable finance, climate, and other sustainability
risk-related prudential guidance, and regulatory and
disclosure requirements. These include:
– The climate-related disclosures regime under the
Financial Markets Conduct Act 2013 in NZ, which requires
mandatory climate-related reporting from early 2024,
and the expected introduction of similar requirements
in Australia in 2024/2025 following the consultations
by Australian Treasury in 2023 on the design and
implementation of standardised, internationally-aligned
requirements for disclosure of climate-related financial
risks and opportunities in Australia.
– Changes to international accounting standards on
disclosure of sustainability and climate-related financial
information published by the International Sustainability
Standards Board in 2023 and amendments to Australian
Accounting Standards proposed by the Australian
Accounting Standards Board (AASB) to introduce three
Australian Sustainability Reporting Standards.
– The final recommendations of the Taskforce on Nature-
related Financial Disclosures which were published in
September 2023.
– Expansion of modern slavery and sustainability due
diligence requirements in Australia, New Zealand and the
European Union.
The full scope, timeline and impact of current and potential
inquiries and regulatory reforms such as those mentioned
above, or how they will be implemented (if at all in some
cases), is not known.
Depending on the specific nature of the regulatory change
requirements and how and when they are implemented or
enforced, they may have an adverse impact on the Group’s
business, operations, structure, compliance costs or capital
requirements, and ultimately its competitiveness, reputation,
financial performance, or financial position.
The Group may be exposed to losses if critical accounting
judgements and estimates are subsequently found to
be incorrect.
Preparation of the Group’s financial statements requires
management to make estimates and assumptions and to
exercise judgement in applying relevant accounting policies,
each of which may directly impact the reported amounts of
assets, liabilities, income, and expenses. A higher degree of
judgement is required for the recognition and estimates used
in the measurement of provisions (including for customer-
related remediation and other regulatory matters), the
determination of income tax, the valuation of financial assets
and liabilities (including fair value and credit impairment of
loans and advances), and the valuation of goodwill and
intangible assets arising from business acquisitions.
If the judgements, estimates, and assumptions used by the
Group in preparing the financial statements are subsequently
found to be incorrect, there could be a significant loss
to the Group beyond that anticipated or provided for,
which may adversely impact the Group’s reputation, financial
performance and financial position.
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2023 Annual Report
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Report of the DirectorsThe directors of National Australia Bank Limited (NAB or the Company) present their report, together with the financial report of the Group, being NAB and its controlled entities, for the year ended 30 September 2023. The following information forms part of the Report of the Directors: •Our business (page 12)•Operating environment (pages 18 to 19)•Information on directors, company secretaries, and board meetings (pages 64 to 68 and 73)•Risk factors (pages 89 to 101)•Climate change and environment (pages 37 to 42)
Operating and financial review
Principal activities
The principal activities of the Group during the year were
banking services, credit and access card facilities, leasing,
housing and general finance, international, investment and
private banking and wealth management services, funds
management and custodian, trustee and nominee services.
For further details on Our business refer to page 12.
Significant change in the state of affairs
• On 28 February 2023, the Group completed the $2.5 billion
on-market buy-back announced on 24 March 2022. On
15 August 2023, the Group announced its intention to buy
back up to $1.5 billion of NAB ordinary shares on-market
to progressively manage its CET1 capital ratio towards its
target range. Including the previous buy-back, the Group
has bought back and cancelled 29,832,512 ordinary shares
($0.9 billion) in the full year ended 30 September 2023
including $0.3 billion (0.07% of CET1 capital) in the half year
ended 30 September 2023.
• Changes to the composition of the Executive Leadership
Team have occurred or were announced during 2023 and up
until the date of this report, namely:
– On 21 March 2023, NAB announced Group Chief Financial
Officer Gary Lennon would retire from NAB effective
1 October 2023. Group Executive Strategy & Innovation
Nathan Goonan was appointed Group Chief Financial
Officer in an expanded role, effective 1 July 2023.
– On 4 July 2023, NAB announced Group Executive People
and Culture Susan Ferrier would retire from NAB effective
31 October 2023. On 3 August 2023 Sarah White,
previously Chief of Staff to the NAB Group CEO, was
appointed Group Executive People & Culture, effective
18 August 2023.
– On 5 October 2023, NAB announced Group Chief Digital,
Data & Analytics Officer Angela Mentis would retire
from NAB. Group Chief Operating Officer Les Matheson
was appointed Group Executive Digital, Data and Chief
Operating Officer in an expanded role. Both changes
were effective 1 November 2023.
– No other changes to the composition of the Executive
Leadership Team occurred during 2023 and up until the
date of this report.
• Changes to the Board occurred or were announced during
2023 and up until the date of this report, namely:
– Christine Fellowes was appointed as an independent
non-executive director, effective 5 June 2023.
– Carolyn Kay was appointed as an independent non-
executive director, effective 31 July 2023.
– Alison Kitchen was appointed as an independent non-
executive director, effective 27 September 2023.
– Two current non-executive directors, David Armstrong
and Peeyush Gupta, will stand down following the
Company’s 2023 AGM in December, having served three
terms of three years on the Board.
– No other changes to the composition of the Board have
occurred during 2023 and up until the date of this report.
There were no other significant changes in the state of affairs
of the Group that occurred during the financial year under
review that are not otherwise disclosed in this report.
Environmental, Social and
Governance disclosure
Environmental regulation and climate-related disclosures
The Group’s operations are not subject to any site-specific
environmental licences or permits which would be considered
particular or significant under the laws of the Commonwealth
of Australia or of an Australian state or territory.
As a lender, the Group may incur environmental liabilities in
circumstances where it takes possession of a borrower’s
assets and those assets have associated environmental risks.
The Group has developed and implemented credit policies
that aim to ensure that these risks are minimised and
managed appropriately.
The Group’s operations are subject to the National
Greenhouse and Energy Reporting Act 2007 (Cth) (NGER Act)
in Australia. While this legislation is not particular to the
Group or significant in its impact, the Group complied with its
requirements. The NGER Act requires the Group to report on
the period from 1 July to 30 June (the environmental reporting
year), therefore, all of the Group's energy and GHG emissions
reporting is aligned to this reporting period. Further details on
the Group’s GHG reporting subject to the NGER Act is provided
in the Climate change and environment section of this Report
on pages 37 to 40.
The Group’s United Kingdom-based operations are subject to
the Energy Savings Opportunities Scheme (ESOS), introduced
by the United Kingdom ESOS Regulations 2014 which came
into force in July 2014. The ESOS requires mandatory energy
assessments (audits) of an organisation's buildings and
transport to be conducted every four years. The Group fulfilled
its most recent ESOS obligation in December 2019 and will
resubmit as required in June 2024.
The Group is voluntarily reporting data required for the
Streamlined Energy and Carbon Reporting (SECR) requirements
which are implemented through the Companies (Directors’
Report) and Limited Liability Partnerships (Energy and Carbon
Report) Regulations 2018 (United Kingdom) as part of the
legislative response to climate change in the United Kingdom.
This information is now provided in the Group’s 2023
Climate Report.
Further details of the Group’s environmental performance are
provided in the Creating value section of our Annual Report,
more specifically, a summary of the Group’s approach to
climate change governance, strategy, risk management and
metrics and targets consistent with the recommendations of
the TCFD is provided on pages 37 to 40 titled Climate change
and environment.
Further detailed information on the Group’s approach to
climate change is provided in the Group’s 2023 Climate
Report, which is aligned to the TCFD requirements, and
includes methodological information related to the Group's
GHG-related reporting, which was previously published in
separate documents.
The Group's 2023 Climate Report is available as part of the
Group’s annual reporting suite at nab.com.au/annualreports. A
detailed breakdown of the Group’s Scope 1, 2 and 3 emissions
is provided in the 2023 Sustainability Data pack.
104 National Australia Bank
Operating and financial review (cont.)
Modern slavery
Information about cash earnings
The Group is subject to modern slavery legislation in Australia
and the United Kingdom. The Group has prepared a Modern
Slavery Act statement which sets out actions taken by the
Group during 2023 to ensure that its business operations, and
its supply chain, are free from slavery and human trafficking.
This statement is made available online at nab.com.au/
modernslaverystatement in accordance with both the UK
Modern Slavery Act and the Modern Slavery Act 2018 (Cth).
Litigation and disputes
From time to time entities within the Group may be involved
in disputes or legal proceedings arising from the conduct
of their business. The outcomes and total costs associated
with such ongoing disputes and proceedings are typically
uncertain. Any material legal proceedings may adversely
impact the Group's reputation and financial performance
and position.
Refer to Note 31 Commitments and contingent liabilities of the
notes to the financial statements for details of the Group's
material legal proceedings and contingent liabilities.
Financial performance summary
The following financial discussion and analysis is based on
statutory information unless otherwise stated. The statutory
information is presented in accordance with the Corporations
Act 2001 (Cth) and Australian Accounting Standards and is
audited by the Group's auditors in accordance with Australian
Auditing Standards.
Non-IFRS key financial performance measures used by
the Group
Certain financial measures detailed in the Report of
the Directors are not accounting measures within the
scope of International Financial Reporting Standards (IFRS).
Management use these financial metrics to evaluate the
Group’s overall financial performance and position and believe
the presentation of these financial measures provide useful
information to analysts and investors regarding the results
of the Group's operations. These financial performance
measures include:
• cash earnings
• statutory return on equity
• cash return on equity
• net interest margin
• average equity (adjusted)
• average interest earning assets
•
total average assets.
The Group regularly reviews the non-IFRS measures included
in the Report of the Directors to ensure that only relevant
financial measures are incorporated. Certain other financial
performance measures detailed in the Report of the Directors
are derived from IFRS measures and are similarly used by
analysts and investors to assess the Group’s performance.
These measures are defined in the Glossary.
Any non-IFRS measures included in this document are not a
substitute for IFRS measures and readers should consider the
IFRS measures as well. The non-IFRS measures referred to
above have not been presented in accordance with Australian
Accounting Standards, nor audited or reviewed in accordance
with Australian Auditing Standards unless they are included in
the financial statements.
Further detail in relation to these financial measures is set out
below and in the Glossary.
Cash earnings is a non-IFRS key financial performance
measure used by the Group and the investment community.
The Group also uses cash earnings for its internal
management reporting as it better reflects what is considered
to be the underlying performance of the Group. Cash earnings
is calculated by adjusting statutory net profit from continuing
operations for certain non-cash earnings items. Non-cash
earnings items are those items which are considered
separately when assessing performance and analysing the
underlying trends in the business. These include items such as
hedging and fair value volatility, the amortisation of acquired
intangible assets and gains or losses and certain other items
associated with acquisitions, disposals and business closures.
Cash earnings does not purport to represent the cash flows,
funding or liquidity position of the Group, nor any amount
represented on a statement of cash flows. It is not a statutory
financial measure and is not presented in accordance
with Australian Accounting Standards and is not audited or
reviewed in accordance with Australian Auditing Standards.
Cash earnings for the year ended 30 September 2023 has been
adjusted for the following:
• hedging and fair value volatility
• amortisation of acquired intangible assets
• acquisitions, disposals and business closures.
Information about net interest margin
Net interest margin is a non-IFRS key financial performance
measure that is calculated as cash net interest income
(Cash NII) expressed as a percentage of average interest
earning assets.
Information about average balances
Average balances, including average equity (adjusted), total
average assets and average interest earning assets are
based on daily statutory average balances.
This methodology produces numbers that NAB believes
more accurately reflect seasonality, timing of accruals and
restructures (including discontinued operations), which would
otherwise not be reflected in a simple average.
Refer to page 106 for a five-year summary of the Group’s
average equity (adjusted), total average assets and average
interest earning assets.
Rounding of amounts
In accordance with ASIC Corporations (Rounding in Financial /
Directors' Reports) Instrument 2016/191, all amounts have
been rounded to the nearest million dollars, except where
indicated. Any discrepancies between total and sums of
components in tables contained in this report are due
to rounding.
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2023 Annual Report
105
Operating and financial review (cont.)
5 Year Financial Performance Summary
Net interest income
Other income
Operating expenses
Credit Impairment (charge) / write-back
Profit before income tax
Income tax expense
Net profit for the year from continuing operations
Net loss after tax for the year from discontinued operations
Net profit for the year
Profit attributable to non-controlling interests
Net profit attributable to owners of the Company
5 Year Key Performance Indicators
Key indicators
Statutory earnings per share (cents) - basic
Statutory earnings per share (cents) - diluted
Statutory return on equity
Cash return on equity(1)
Profitability, performance and efficiency measures
Dividend per share (cents)
Net interest margin
Total Group capital
Common Equity Tier 1 (CET1) capital ratio
Tier 1 capital ratio
Total capital ratio
Risk-weighted assets ($bn)
Volumes ($bn)
Gross loans and acceptances (GLAs)(2)
Average interest earning assets
Total average assets
Total customer deposits
Average equity (adjusted)(3)
Asset quality
2023
$m
16,807
3,841
2022
$m
14,840
3,730
Group
2021
$m
13,793
2,936
(9,382)
(8,702)
(7,863)
(124)
9,744
202
9,068
2020
$m
13,877
3,259
(9,221)
(2,752)
5,163
2019
$m
13,555
3,980
(8,263)
(927)
8,345
(2,684)
(2,597)
(1,665)
(2,440)
7,060
(169)
6,891
-
6,891
6,471
(104)
6,367
3
6,364
3,498
(935)
2,563
4
2,559
5,905
(1,104)
4,801
3
4,798
(816)
10,450
(2,980)
7,470
(51)
7,419
5
7,414
Group
2023
2022
2021
2020
2019
236.4
228.7
12.3%
12.9%
167
1.74%
12.22%
14.19%
19.88%
435.0
708.5
966.7
1,065.1
587.4
60.1
214.1
205.6
11.3%
11.7%
151
1.65%
11.51%
13.14%
18.17%
449.9
687.7
900.3
991.5
566.7
60.8
193.0
185.2
10.4%
10.7%
127
1.71%
13.00%
14.64%
18.91%
417.2
629.1
805.0
889.6
500.3
61.2
82.1
80.5
4.4%
6.5%
60
1.77%
11.47%
13.20%
16.62%
425.1
594.1
781.7
877.0
468.2
56.7
168.6
164.4
9.1%
11.4%
166
1.78%
10.38%
12.36%
14.68%
415.8
601.4
758.8
835.9
424.6
51.6
90+ days past due and gross impaired assets to GLAs
0.75%
0.66%
0.94%
1.03%
0.93%
Full-time equivalent employees (FTE)(4)
FTE (spot)
FTE (average)
38,516
37,290
35,558
34,022
33,275
34,217
34,944
34,841
34,370
33,950
(1) Full detail on how cash earnings is defined, a discussion of non-cash earnings items and a full reconciliation of statutory net profit attributable to owners of the
Company is set out in Note 2 Segment information of the Financial Report on page 169. Statutory return on equity and statutory earnings per share (EPS) are presented
on page 106.
(2) Including loans and advances at fair value.
(3) Average equity on a cash and statutory basis are equal.
(4) Excluding discontinued operations, FTE (spot) is 38,128 (2022: 35,128) and FTE (average) is 36,895 (2022: 33,530).
106 National Australia Bank
Operating and financial review (cont.)
Financial performance
Net interest income
Other income
Net operating income
Operating expenses
Credit Impairment charge
Profit before income tax
Income tax expense
Net profit for the year from continuing operations
Net loss after tax for the year from discontinued operations
Net profit for the year
Profit / (loss) attributable to non-controlling interests
Net profit attributable to owners of the Company
September 2023 v September 2022
Net profit attributable to owners of the Company (statutory
net profit) increased by $523 million or 7.6%.
Net interest income increased by $1,967 million or 13.3%.
Excluding the Citi consumer business, net interest income
increased by $1,776 million or 12.1%. This includes a decrease
of $318 million due to movements in economic hedges, offset
in other operating income. Excluding these movements, the
underlying increase of $2,094 million or 14.3% was primarily
due to higher earnings on deposits and capital driven by the
rising interest rate environment and higher average interest
earning assets. These movements were partially offset by
lower housing lending margins, deposit mix impact due to
growth in term deposits and higher wholesale funding costs.
Other income increased by $111 million or 3.0%. Excluding the
Citi consumer business, other operating income increased by
$53 million or 1.4%. This includes an increase of $318 million
due to movements in economic hedges, offset in net interest
income. Excluding these movements, the underlying decrease
of $265 million or 7.1% was primarily due to lower volumes
of realised gains on bond sales in Treasury (high-quality
liquids portfolio), and the impact of one-off gain on the
disposal of BNZ Life not repeated in the September 2023
full year. These were partially offset by higher NAB risk
management income in Markets, combined with a positive
derivative valuation adjustment.
Operating expenses increased by $680 million or 7.8%.
Excluding the Citi consumer business, operating expenses
increased by $440 million or 5.2%. This includes an increase
of $40 million for a provision in respect of a one-off levy for
the Compensation Scheme of Last Resort (CSLR). Excluding
these movements, the underlying increase of $400 million
or 4.7% was primarily driven by higher personnel expenses
due to an increase in average FTE and salary and related
costs, together with continued investment in technology and
compliance capabilities including fraud and cyber security.
This was partially offset by productivity benefits achieved
through continued process improvements and simplification
of the Group’s operations, lower costs associated with
the acquisition, disposals and closure of Group businesses,
combined with lower remediation charges.
Credit impairment charge increased by $692 million driven by
a higher level of collective credit impairment charges across
the Group's lending portfolio, combined with a higher level of
specific credit impairment charges off a low base.
Group
2023
$m
16,807
3,841
20,648
(9,382)
(816)
10,450
(2,980)
7,470
(51)
7,419
5
7,414
2022
$m
14,840
3,730
18,570
(8,702)
(124)
9,744
(2,684)
7,060
(169)
6,891
-
6,891
Income tax expense increased by $296 million or 11.0% largely
due to a higher profit before tax.
Discontinued operations are excluded from the individual
account lines of the Group's results and are reported
as a single net loss after tax line item. The results of
discontinued operations primarily relate to costs associated
with managing the run-off of the MLC Wealth retained
entities, combined with a re-assessment of the provisions for
customer-related remediation.
Review of group and divisional results
September 2023 v September 2022
Group
Net profit increased by $523 million or 7.6%.
Business and Private Banking
Net profit increased by $298 million or 9.9%, driven by higher
revenue as a result of volume growth and higher net interest
margin. This was partially offset by increased operating
expenses and credit impairment charges.
Personal Banking
Net profit decreased by $170 million or 10.7%, driven by higher
credit impairment charges and operating expenses, partially
offset by an increase in revenue.
Corporate and Institutional Banking
Net profit increased by $57 million or 3.3%, driven by higher
revenue partially offset by higher expenses and credit
impairment charges.
New Zealand Banking
Net profit increased by $61 million or 4.6%, driven by higher
revenue, partially offset by higher operating expenses and
credit impairment charges.
Corporate Functions and Other
Net loss decreased by $277 million or 36.3%, driven by lower
credit impairment charges and higher NAB risk management
income in Treasury, partially offset by higher operating
expenses combined with the impact of the one-off gain on
the disposal of BNZ Life not repeated in the September 2023
full year.
2023 Annual Report
107
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Operating and financial review (cont.)
Group balance sheet review
Assets
Cash and liquid assets
Due from other banks
Collateral placed
Trading assets
Debt instruments
Other financial assets
Derivative assets
Loans and advances
All other assets
Total assets
Liabilities
Due to other banks
Collateral received
Other financial liabilities
Derivative liabilities
Deposits and other borrowings
Bonds, notes and subordinated debt
Debt issues
All other liabilities
Total liabilities
Total equity
39,516
10,672
66,352
35,633
682,120
135,645
8,561
19,081
997,580
61,503
74,679
17,245
23,286
57,486
683,526
119,283
7,318
13,271
996,094
59,032
Total liabilities and equity
1,059,083
1,055,126
September 2023 v September 2022
Assets
Total assets increased by $3,957 million or 0.4%. The key
movements are as follows:
• Cash and liquid assets decreased by $31,752 million or 56.2%
predominantly due to the commencement of measuring
certain reverse repurchase agreements at fair value
through profit or loss which are now presented within
Trading assets.
• Due from other banks decreased by $24,555 million
or 17.3% primarily due to a decrease in the Exchange
Settlement Account (ESA) balance with the RBA and the
commencement of measuring certain reverse repurchase
agreements at fair value through profit or loss which are
now presented within Trading assets, partly offset by an
increase in deposits with overseas central banks.
• Collateral placed decreased by $1,829 million or 13.9% as a
result of a decrease in derivative liabilities.
• Trading assets increased by $60,595 million driven by the
commencement of measuring certain reverse repurchase
agreements at fair value through profit or loss.
• Debt instruments increased by $4,277 million or 10.2%
due to an increase in semi-government bonds, notes
and securities.
• Derivative assets decreased by $26,747 million or 43.8%
predominantly driven by foreign exchange and interest rate
movements during the period.
•
Loans and advances increased by $22,268 million or 3.3%
primarily due to growth in housing lending.
(1) Amounts presented in this section are based on cash earnings.
108 National Australia Bank
Group
2023
$m
24,699
117,306
11,286
101,168
46,357
1,430
34,269
702,702
19,866
2022
$m
56,451
141,861
13,115
40,573
42,080
2,061
61,016
680,434
17,535
• All other assets increased by $2,331 million or 13.3% primarily
due to an increase in accrued interest receivable and
outstanding settlements for securities sold.
Liabilities
Total liabilities increased by $1,486 million or 0.1%. The key
movements are as follows:
• Due to other banks decreased by $35,163 million or 47.1%
predominantly due to the commencement of measuring
certain repurchase agreements at fair value through profit
or loss which are now presented within Other financial
liabilities, and a reduction in TFF owing to the RBA.
• Collateral received decreased by $6,573 million or 38.1% due
to a decrease in derivative assets.
• Other financial liabilities increased by $43,066 million due
to the commencement of measuring certain repurchase
agreements at fair value through profit or loss.
1,059,083
1,055,126
• Derivative liabilities decreased by $21,853 million or 38.0%
predominantly driven by foreign exchange and interest rate
movements during the period.
• Deposits and other borrowings decreased by $1,406 million
or 0.2% primarily due to the commencement of measuring
certain repurchase agreements at fair value through profit
or loss which are now presented within Other financial
liabilities, partly offset by growth in customer deposits.
• Bonds, notes and subordinated debt increased by
$16,362 million or 13.7% primarily driven by net new issuances
in line with the Group's funding requirements.
• All other liabilities increased by $5,810 million or 43.8%
primarily due to an increase in accrued interest payable
and payables for securities purchased.
Equity
Total equity increased by $2,471 million or 4.2%. The key
movements are as follows:
• Contributed equity decreased by $853 million or 2.2%
primarily driven by share buy-backs during the period.
• Reserves increased by $647 million primarily due to
movements in the foreign currency translation reserve.
• Retained profits increased by $2,328 million or 10.8%
reflecting current period statutory profits, partially offset
by dividends paid.
Strategic highlights(1)
The close of 2023 marks the third full year under the Group’s
refreshed long-term strategy. This strategy is centred on
delivering better outcomes for customers and colleagues
while keeping the bank safe. It is supported by disciplined
execution and persistent investment to create a simpler,
more streamlined business, which is more productive, resilient
and efficient. Good progress has been made towards the
Group's strategic objectives over the past three years with
more to do. The Group remains focused on executing its
strategy and building on the progress made in recent years.
The Group exists to serve customers well and help our
communities prosper. To achieve this, the Group is focused
on key priorities that it believes will make a real difference to
its customers and colleagues, and support over time its aim to
be known for being:
• Relationship-led; building on market leading expertise, data
and insights.
• Easy; a simpler, more seamless and digitally enabled bank
that gets things done faster.
Operating and financial review (cont.)
• Safe; protect customers and colleagues through financial
and operational resilience.
•
Long-term; deliver sustainable outcomes for stakeholders.
Executing the Group’s strategy is expected to deliver better
customer outcomes, more engaged colleagues and improved
shareholder value. The Group will measure the success of its
strategy and execution according to four key ambitions:
• Colleague Engagement – top quartile.
• Customer NPS – strategic NPS(1) positive and ranked first
among Australian banks
• Cash EPS growth(2) – delivered through a focus on market
share growth in target segments while managing risk and
pricing disciplines, and a disciplined approach to managing
costs and investment.
• Return on Equity (ROE)(2) – targeting double digit cash ROE.
Execution of the Group's strategy over the past three years
has positioned it well with strong, safe balance sheet settings
and attractive growth options. This has allowed the Group to
continue to grow in 2023, in a selective and targeted manner,
despite a more challenging operating environment.
In Business and Private Banking, where the Group has the
leading SME business lending market share, it is continuing to
leverage growth opportunities across its franchise through
a relationship-led approach increasingly enabled by digital,
data and analytics. Following a strong growth year in 2022,
business lending balances rose 8% over 2023 including 24%
growth in small business lending, benefiting from simplified
origination, enhanced digital capability and specialist local
small business bankers. Heightened focus and increasing
simplification and digitisation of the account opening process
is also supporting strong growth in SME deposits. New
business transaction account openings grew 50% over the
three years to September 2023, including an 11% increase
over the September 2023 financial year. Delivering better
payments experiences remains a key priority and 2023 has
seen the rollout of nextgen terminals for healthcare providers
and SMEs, increased self service functionality via the Group's
new payment portal and continued launch of innovative
solutions such as NAB Flex-Flow Lending which gives merchant
customers fast access to unsecured lending.
In Personal Banking, the Group remains focused on providing
simpler, more digital banking experiences to drive quicker,
better outcomes for customers and colleagues. Simple
everyday banking products opened digitally increased to 74% in
2023 from 71% in 2022 and 62% in 2020. Australian home lending
remains a key market, and the Group is continuing to invest
to deliver better customer experiences including further
progressing its simple and digital home loan initiative with
rollout to brokers and Business and Private Banking underway
in 2023. However, given a number of sector headwinds in
2023 including heightened refinancing activity and competitive
pressures, the Group adopted a disciplined approach to
originating new home loans, which saw its share of system
growth(3) reduce from 1.1x in 2022 to 0.7x in 2023.
The Group remains excited about growth in unsecured
lending and ubank where it is leveraging capability from
recent acquisitions to deliver better, more targeted customer
propositions and diversify its portfolio. Over 2023, the Group's
credit card balances and market share increased. Over the
same period ubank recorded continued strong new customer
acquisition with the addition of approximately 175,000 net new
customers in 2023, weighted towards its target segment of 18
to 35 year-olds.
Corporate and Institutional Banking delivered improved returns
and continued strong customer outcomes despite lower
lending balances. In a difficult market, New Zealand Banking
achieved good growth in home lending and deposits, while
business lending was more subdued reflecting weak system
growth and disciplined portfolio management.
Having a strong customer franchise and engaged colleagues
are key to the Group's ability to grow sustainably, and is
supported by a consistent focus on improving customer and
colleague experiences. The Group's most recent colleague
engagement score of 78 at July 2023 is up two points since
August 2022 and one point higher than the top quartile
benchmark(4) which is consistent with its ambition. Customer
outcomes in key segments in 2023 have remained first or
second ranked versus major Australian bank peers. But there
is more to do to achieve the Group's objective of being
number one of the major Australian banks with positive NPS
scores. Over the 12 months to September 2023, Business
NPS improved from -5 to 5 with NAB continuing to rank
second among major Australian banks while Consumer NPS
declined from 0 to -2 with NAB ranking first among major
Australian banks. Customer outcomes for 2023 in Corporate
and Institutional Banking include Institutional NPS(5) declining
five points to 36 and Relationship Strength Index (RSI)(6)
declining 29 points to 593, in both cases reducing the Group's
ranking versus major Australian banks from first to second,
although pleasingly RSI continues to rank first across a range
of specialist focus areas including Transactional Banking(7) and
Debt Capital Markets(8).
A key focus of the Group's investment over recent years has
been on simplifying, automating and digitising its business and
increasing the use of data and analytics. These initiatives
are delivering better outcomes for customers and colleagues
by allowing bankers to spend more time with customers and
provide more insights and quicker responses, while at the
same time letting customers increasingly self serve when
they want to. They are also making the Group more efficient,
helping it manage costs while investing to grow. In 2023 the
Group achieved productivity benefits of $398 million. During
a period of elevated inflationary pressures, this allowed
the Group to limit growth in cash costs in 2023 to 5.6%(9)
(1) Net Promoter® and NPS® are registered trademarks and Net Promoter Score and Net Promoter Systems are trademarks of Bain & Company, Inc., NICE Systems, Inc.,
and Fred Reichheld. Sourced from DBM Business and Consumer Atlas (part of RFI Global), measured on 6 month rolling average to September 2023. Business NPS is
based on equal (25:25:25:25) combined weighting of NAB turnover segments: Micro (Up to $100k turnover), Small ($100k - $5m turnover), Medium ($5m - $50m turnover),
Large ($50m+). Consumer NPS excludes consumers with Personal income of $260k+ and/or investible assets $1m+. Ranking based on absolute scores, not statistically
significant differences.
(2) Full detail on how cash earnings is defined, a discussion of non-cash earnings items and a full reconciliation of statutory net profit attributable to owners of the
Company is set out in Note 2 Segment information of the Financial Report on page 169. Statutory return on equity and statutory EPS are presented on page 106.
(3) APRA Monthly Authorised Deposit-taking Institution statistics. Latest data as at September 2023 (adjusted for reclassification of the Citi consumer business). 2022
multiple of system growth excludes impact of Citi consumer business balances acquired by NAB Group on 1 June 2022.
(4) Engagement scores refer to Glint ‘Heartbeat’ outcomes. Top quartile comparison is based upon Glint’s client group (domestic and global, from all industries).
(5) Peter Lee Associates Australia - Corporate and Institutional Relationship Banking Survey 2023. Ranking against the four major domestic banks. Net Promoter® and NPS®
are registered trademarks and Net Promoter Score and Net Promoter System are trademarks of Bain & Company, Satmetrix Systems and Fred Reichheld.
(6) Peter Lee Associates Australia - Corporate and Institutional Relationship Banking Survey 2023. Ranking against all banks included in survey. Relationship Strength Index
(RSI) is based on the results of key qualitative measures.
(7) Peter Lee Associates Australia - Transaction Banking Survey 2023. Ranking against the four major domestic banks.
(8) Peter Lee Associates Australia - Debt Capital Markets Survey 2023. Ranking against the four major domestic banks.
(9) On a cash earnings basis. On a statutory basis, expenses in 2023 increased by 7.8% compared with 2022.
2023 Annual Report
109
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Operating and financial review (cont.)
(excluding Citi consumer business costs and a provision of
$40 million in respect of a one-off levy for the Compensation
Scheme of Last Resort), while maintaining investment spend
at approximately $1.4 billion. Looking to 2024, the Group
expects to continue its balanced approach of maintaining
cost discipline while investing for sustainable growth, and
is targeting investment spend remaining at approximately
$1.4 billion and further productivity savings of approximately
$400 million.
Safety is a key pillar of the Group's long term strategy and
keeping customers safe remains an important focus. Over
2023 the Group accelerated efforts to protect customers
against the rapid rise in fraud and scams. This includes
investment in customer awareness and education, 24/7
account monitoring, security alerts and proactive payment
prompts, along with additional resourcing and working
with telecommunication providers to help limit NAB-related
spoofing calls and messages. More can and will be done at
a customer, bank, industry, government and community level
to deter criminals. The Group also recognises the current
environment is more challenging for its customers including
the impact of cost of living pressures. To support those
customers needing help, the Group has increased resourcing
in its customer assistance and hardship teams during 2023.
Safety also requires that the Group maintain prudent balance
sheet settings and manage risk with discipline to ensure it
can grow sustainably. At September 2023 collective provisions
as a ratio of credit risk weighted assets were 1.47% and
the share of lending funded by deposits was above 80% -
both materially stronger than pre COVID-19 levels. Liquidity
increased over 2023 and remains well above regulatory
minimums and the Group continued to access term wholesale
funding across a range of products, currencies and tenors,
issuing $40 billion(1) in 2023. The Group continues to target
a CET1 capital ratio of 11-11.5% reflecting a balance between
maintaining a strong balance sheet through the cycle while
improving shareholder returns. Over 2023, Group CET1 ratio
increased 71 basis points to 12.22% at September 2023. This
includes a 47 basis point benefit from implementation of
APRA's revised capital framework at 1 January 2023, partly
offset by a reduction of 20 basis points from share buy-backs
during the period. Adjusting for the remaining $1.2 billion share
buy-back outstanding at September 2023, proforma Group
CET1 is approximately 11.94%(2).
Despite retaining strong balance sheet settings over 2023,
the Group has delivered improved returns for shareholders
consistent with its strategic ambition. These outcomes reflect
the ongoing execution of the Group's strategy combined with
benefits from the higher interest rate environment. Cash EPS(3)
increased 26% compared with 2022 and cash ROE(3) increased
to 12.9% compared with 11.7% in 2022. The final 2023 dividend
has been set at 84 cents per share, bringing total dividends
for the year ended 30 September 2023 to 167 cents per share
which is 10.6% higher than 2022. This represents a 2023 cash
earnings payout ratio of 67.7%, consistent with the Group's
target dividend payout ratio which is guided by a range of 65% –
75% of cash earnings(4), subject to Board determination based
on circumstances at the relevant time.
Capital management and funding review
Balance sheet management overview
The Group has a strong capital and liquidity position,
consistent with its commitment to balance sheet strength.
Regulatory reform
The Group remains focused on areas of regulatory change.
Key reforms that may affect the Group's capital and
funding include:
Revisions to the capital framework
• APRA prudential standards for the revised capital
framework came into effect on 1 January 2023. From
31 March 2023, capital ratios presented in this report are
in accordance with the revised framework. APRA’s revisions
to the framework include:
– Improving flexibility via increasing regulatory
capital buffers.
– Implementing more risk-sensitive risk-weights.
– Introducing a capital floor for internal ratings-based
(IRB) ADIs.
– Improving transparency and comparability through the
disclosure of risk-weighted assets (RWA) under the
standardised approach.
• The Group has applied APS 115 Capital Adequacy:
Standardised Measurement Approach to Operational Risk
from 1 January 2022.
• APRA’s revised leverage ratio exposure measurement
methodology came into effect on 1 January 2023, as did the
minimum leverage ratio requirement of 3.5% for IRB ADIs. The
30 September 2023 leverage ratio of 5.2% is in accordance
with the revised methodology.
• APRA has announced that revisions to APS 117 Capital
Adequacy: Interest Rate Risk in the Banking Book will be
released for consultation in late 2023 with an expected
effective date in 2025.
•
Following the APS 117 finalisation, APRA plans to consult
on revisions to the market risk capital standards over
2024. The process will implement the Basel Committee on
Banking Supervision’s fundamental review of the trading
book, effective from 2026.
• APRA has also deferred the implementation date for Basel
III reforms to APS 180 Capital Adequacy: Counterparty Credit
Risk to 2026.
Increased loss-absorbing capacity for ADIs
In December 2021, APRA released its finalised requirements
for the Australian loss-absorbing capacity framework. The
final requirements represent a further increase in the amount
of Total capital required by domestic systemically important
banks (D-SIBs) equal to 1.5% of RWA, with a total increase of
4.5% of RWA required by January 2026. The interim requirement
of an increase in the Total capital requirement of 3% of RWA by
1 January 2024 remains in place. Based on the Group’s RWA and
Total capital position as at 30 September 2023, NAB has met
the interim requirement.
Includes RBNZ’s Funding for Lending Programme (FLP) of $1.3 billion.
(1)
(2) On 28 February 2023 the Group completed its $2.5 billion on-market share buy-back announced in March 2022. This includes $0.6 billion (19,270,329 ordinary shares)
bought back and cancelled in the March 2023 half year. On 15 August 2023 the Group announced its intention to acquire up to $1.5 billion ordinary shares via an
on-market buyback. This buy-back is expected to be undertaken over approximately 12 months, with approximately $0.3 billion (10,562,183 ordinary shares) acquired as
at 30 September 2023.
(3) Full detail on how cash earnings is defined, a discussion of non-cash earnings items and a full reconciliation of statutory net profit attributable to owners of the
Company is set out in Note 2 Segment information of the Financial Report on page 169. Statutory return on equity and statutory EPS are presented on page 106.
(4) Statutory dividend payout ratio is 70.6%.
110 National Australia Bank
Operating and financial review (cont.)
RBNZ capital review
Tier 2 capital initiatives
In December 2019, the RBNZ finalised its review of the
capital adequacy framework. The RBNZ amendments to the
amount of regulatory capital required of locally incorporated
banks include:
• An increase in credit RWA for banks that use the RBNZ's
internal ratings-based approach due to:
– The use of the standardised approach for bank
and sovereign exposures, and the introduction of an
overall minimum standardised floor, implemented on
1 January 2022.
– An increase in the RWA scalar, implemented on
1 October 2022.
• An increase in the Tier 1 capital requirement to 16% of RWA,
and an increase in the Total capital requirement to 18% of
RWA, to be phased in by 2028.
The Group’s Tier 2 capital initiatives during the September 2023
full year included the following:
• On 12 January 2023, NAB issued US$1.25 billion of
Subordinated Notes.
• On 9 March 2023, NAB issued $1.25 billion of
Subordinated Notes.
• On 19 May 2023, NAB redeemed SGD450 million of
Subordinated Notes.
• On 6 June 2023, NAB issued HKD640 million of
Subordinated Notes.
• On 20 September 2023, NAB redeemed $943,210,100 of
NAB Subordinated Notes 2 issued on 20 March 2017,
in accordance with the redemption notice issued on
11 July 2023.
• As at 30 September 2023, BNZ Tier 1 and Total capital ratios
BNZ capital initiatives
were 14.6% and 15.7%.
Additional Tier 1 capital discussion paper
In September 2023, APRA released a discussion paper outlining
potential options for, and seeking feedback from stakeholders
on, improving the effectiveness of Additional Tier 1 (AT1)
capital in Australia. APRA intends to follow this process with
a formal consultation in 2024 on any proposed amendments to
prudential standards.
Liquidity requirements
APRA expects to conduct a comprehensive review of APS 210
Liquidity in 2024, with an expected effective date in 2026.
On 14 June 2023, BNZ issued NZD375 million of Perpetual
Preference Shares (PPS), which qualify as AT1 capital under
RBNZ rules. With RBNZ’s prior approval, BNZ may elect to
redeem the PPS on the first optional redemption date
(14 June 2029) and each subsequent distribution payment
date, provided certain conditions are met.
Funding and liquidity
The Group monitors the composition and stability of funding
and liquidity through the Board approved risk appetite which
includes compliance with the regulatory requirements of
APRA's Liquidity coverage ratio (LCR) and Net Stable Funding
Ratio (NSFR).
Capital management
Funding
The Group’s capital management strategy is focused on
adequacy, efficiency and flexibility. The capital adequacy
objective seeks to ensure sufficient capital is held in excess
of regulatory requirements and is within the Group’s balance
sheet risk appetite. This approach is consistent across the
Group’s subsidiaries.
The Group’s capital ratio operating targets are regularly
reviewed in the context of the external economic and
regulatory outlook with the objective of maintaining balance
sheet strength. From 1 January 2023, the Group’s CET1 target
range moved to 11.00-11.50% to align with the new calculation
methodology under APRA’s revised capital framework.
On 28 February 2023, the Group completed the $2.5 billion on-
market buy-back announced on 24 March 2022.
On 15 August 2023, the Group announced its intention to buy
back up to $1.5 billion of NAB ordinary shares on-market to
progressively manage its CET1 capital ratio towards its target
range. NAB commenced the further buy-back on 29 August
2023. Including the previous buy-back, NAB has bought back
and cancelled 29,832,512 ordinary shares ($0.9 billion) in the full
year ended 30 September 2023 including $0.3 billion (0.07% of
CET1 capital) in the half year ended 30 September 2023.
Additional Tier 1 capital initiatives
On 14 September 2023, the Group issued $1,250 million of
NAB Capital Notes 7, which will mandatorily convert into NAB
ordinary shares on 17 June 2033, provided certain conditions
are met.
With APRA’s prior written approval, NAB may elect to convert,
redeem or resell these NAB Capital Notes 7 on 17 September
2030, 17 December 2030, 17 March 2031, 17 June 2031, or on the
occurrence of particular events, provided certain conditions
are met.
The Group employs a range of metrics to set its risk appetite
and measure balance sheet strength. The NSFR measures the
extent to which assets are funded with stable sources of
funding to mitigate the risk of future funding stress.
As at 30 September 2023, the Group’s NSFR was 116% down 3%
compared to 30 September 2022, with the movement primarily
driven by impacts associated with the maturity of the Initial
Allowance of the Term Funding Facility (TFF) and the 2024
maturities of the Additional and Supplementary Allowances of
the TFF.
Another key structural measure for balance sheet strength
is the Stable Funding Index (SFI), which is comprised of the
Customer Funding Index (CFI) and the Term Funding Index
(TFI). The CFI represents the proportion of the Group’s core
assets that is funded by customer deposits. Similarly, the
TFI represents the proportion of the Group’s core assets
that is funded by term wholesale funding with a remaining
term to maturity of greater than 12 months, including TFF,
Term Lending Facility (TLF) and Funding for Lending Programme
(FLP) drawdowns.
For the 30 September 2023 full year, the SFI remained at 102%
as term wholesale funding and remaining TFF moving within 12
months to maturity was met with a similar increase in new term
wholesale funding. The increase in lending growth was largely
funded by deposit inflows.
Term wholesale funding
The Group maintains a well-diversified term wholesale funding
profile across issuance type, currency, investor location
and tenor.
In March 2023 global term wholesale funding markets were
impacted by the events surrounding Credit Suisse and the US
regional bank failures. More recently term wholesale funding
2023 Annual Report
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Operating and financial review (cont.)
markets have been driven by global monetary policy and
increased interest rate volatility.
.
The Group raised $40.2 billion(1) of term wholesale funding
during the September 2023 full year. NAB raised $35.1 billion
of term wholesale funding, including $3.2 billion of Tier
2 subordinated debt and BNZ raised $3.9 billion of term
wholesale funding.
The weighted average maturity of term wholesale funding
issued by the Group in the September 2023 full year was 4.3(2)
years. The weighted average remaining maturity of the Group’s
term wholesale funding portfolio is 3.5(2) years.
Term wholesale funding markets continue to be influenced by
the economic environment, investor sentiment and impacts of
monetary and fiscal policy settings.
Short-term wholesale funding
For the September 2023 full year, the Group accessed
international and domestic short-term funding through
wholesale markets. In addition, the Group has accessed
secured short-term funding in the form of repurchase
agreements primarily to support markets and trading
activities. Repurchase agreements entered into, excluding
those associated with the TFF, TLF and FLP, are materially
offset by reverse repurchase agreements with similar tenors.
Liquidity Coverage Ratio
The LCR measures the adequacy of High-quality liquid assets
(HQLA) available to meet net cash outflows over a 30-day
period during a severe liquidity stress scenario. HQLA consists
of cash, central bank reserves and highly rated government
securities. In addition to HQLA, Alternative liquid assets (ALA)
can also contribute to regulatory liquidity. ALA has previously
included the Committed Liquidity Facility (CLF) which was in
effect pre 1 January 2023, and currently includes certain RBNZ
repo-eligible securities.
The Group maintains a well-diversified liquid asset portfolio
to support regulatory and internal requirements in the
regions in which it operates. The average value of regulatory
liquid assets held through the September 2023 quarter was
$210 billion which was comprised of $209 billion of HQLA and
$1 billion of RBNZ repo-eligible securities.
The Group's LCR averaged 140% during the September quarter,
an increase of 9% compared to September 2022.
A detailed breakdown of quarterly average net cash outflows
is provided in the September 2023 Pillar 3 Report.
Dividend and Dividend Reinvestment Plan (DRP)
The final dividend in respect of the year ended 30 September
2023 has been increased to 84 cents, 100% franked, payable on
15 December 2023.
The extent to which future dividends on ordinary shares
and distributions on frankable hybrids will be franked is
not guaranteed and will depend on a number of factors,
including capital management activities and the level of
profits generated by the Group that will be subject to tax
in Australia.
The Group periodically adjusts its DRP to reflect its capital
position and outlook. The DRP discount for the 2023 final
dividend is nil. Eligible shareholders have the ability to
participate in the DRP for the 2023 final dividend for up
to 5 million NAB ordinary shares per participant. The Group
expects to satisfy the DRP in full by an on-market purchase
of shares.
Includes FLP.
(1)
(2) Excludes AT1 capital, Residential Mortgage Backed Securities (RMBS), TFF and FLP.
112 National Australia Bank
Directors’ information
For information on the directors, company secretaries and board meetings refer to pages 64 to 68 and 73.
Directors' and officers' indemnity
NAB’s constitution
To the maximum extent permitted by law and without limiting the Company’s power, the Company may indemnify any current or
former officer out of the property of the Company against:
• Any liability incurred by the person in the capacity as an officer (except a liability for legal costs).
•
•
•
Legal costs incurred in defending or resisting (or otherwise in connection with) proceedings, whether civil or criminal or of an
administrative or investigatory nature, in which the officer becomes involved because of that capacity.
Legal costs incurred in connection with any investigation or inquiry of any nature (including, without limitation, a royal
commission) in which the officer becomes involved (including, without limitation, appearing as a witness or producing
documents) because of that capacity.
Legal costs incurred in good faith in obtaining legal advice on issues relevant to the performance of their functions and
discharge of their duties as an officer, if that expenditure has been approved in accordance with the terms of any applicable
deed or agreement entered into pursuant to article 20.3 or any applicable policy of the Company, except to the extent that:
– The Company is forbidden by law to indemnify the person against the liability or legal costs, or
– An indemnity by the Company of the person against the liability or legal costs, if given, would be made void by law.
Under Article 20.2, the Company may pay or agree to pay, whether directly or through an interposed entity, a premium for a
contract insuring a person who is or has been an officer against liability incurred by the person in that capacity, including a
liability for legal costs, unless:
• The Company is forbidden by law to pay or agree to pay the premium, or
• The contract would, if the Company paid the premium, be made void by law.
The Company may enter into an agreement with a person referred to in Articles 20.1 and 20.2 with respect to the subject matter
of those Articles. Such an agreement may include provisions relating to rights of access to the books of the Company . In
the context of Article 20, ‘officer’ means a director, secretary or senior manager of NAB or of a related body corporate of
the Company.
The Company has executed deeds of indemnity in favour of each director of NAB and certain directors of related bodies
corporate of the Company. Some companies within the Group have extended equivalent deeds of indemnity in favour of
directors of those companies.
Directors' and officers' insurance
During the year, the Company, pursuant to Article 20, paid a premium for a contract insuring all directors, secretaries, executive
officers and officers of the Company and of each related body corporate of the Company. The contract does not provide
cover for the independent auditors of the Company or of a related body corporate of the Company. In accordance with usual
commercial practice, the insurance contract prohibits disclosure of the premium payable, the policy limits and the nature of the
liabilities covered.
Directors' and executives' interests
Particulars of shares, rights and other relevant interests held directly and indirectly by directors and Group Executives are set
out in the Remuneration Report.
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2023 Annual Report
113
Other matters
Rights
As at the date of this report, there are 3,635,434 rights outstanding in relation to NAB fully paid ordinary shares. No exercise price
is payable for rights. The latest dates for exercise of the rights range between 15 November 2023 and 15 November 2030. Persons
holding rights are not entitled to participate in capital actions by NAB (such as rights issues or bonus issues).
For the period from 1 October 2023 to the date of this report, no NAB fully paid ordinary shares were issued as a result of the
exercise of a right.
For further details on rights refer to Note 35 Equity-based plans of the notes to the financial statements and Section 7.4 of the
Remuneration Report.
Future developments
In the opinion of the directors, discussion or disclosure of any further future developments including the Group’s business
strategies and its prospects for future financial years would be likely to result in unreasonable prejudice to the interests of
the Group.
Proceedings on behalf of NAB
There are no proceedings brought or intervened in, or applications to bring or intervene in proceedings, on behalf of NAB by a
member or other person entitled to do so under section 237 of the Corporations Act 2001 (Cth).
Events subsequent to reporting date
There are no items, transactions or events of a material or unusual nature that have arisen in the period between 30 September
2023 and the date of this report that, in the opinion of the directors, have significantly affected or may significantly affect the
operations of the Group, the results of those operations or the state of affairs of the Group in future years.
Integrity of reporting
The directors of NAB have a responsibility with respect to the integrity of external reporting. This involves reviewing and
monitoring, with the assistance of the Board Audit Committee and management, the processes, controls and procedures which
are in place to maintain the integrity of the Group’s financial statements.
Further details on the role of the Board and its committees can be found in NAB's 2023 Corporate Governance Statement in the
Corporate Governance Statement section of this report and is available online at nab.com.au/about-us/corporate-governance.
External auditor
EY were appointed as the Group external auditor on 31 January 2005 and have provided the audit opinion on the Financial Report
for 19 years. Mr Tim Dring was appointed on 16 December 2022 as the Group's Lead Partner succeeding Ms Sarah Lowe on the
completion of her five-year tenure. The Audit Committee conducts an annual review of the adequacy of the external audit with
emphasis on effectiveness, performance and independence of the external auditor. The Audit Committee resolved EY should
continue as the Group's external auditor.
There is no person who has acted as an officer of the Group during the 2023 financial year who has previously been a partner at
EY when that firm conducted the Group's audit.
Non-audit services, audit-related, taxation-related services
The remuneration of the external auditor is set out in Note 34 Remuneration of external auditor of the notes to the financial
statements and includes details of the fees paid or due and payable for audit-related, taxation-related and non-audit services
provided by EY to the Group during 2023.
In accordance with advice received from the Board Audit Committee, the directors are satisfied that the provision of audit-
related, taxation-related and non-audit services during the year to 30 September 2023 by EY is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001 (Cth). The directors are satisfied because the
Board Audit Committee or its delegate has assessed each service, having regard to auditor independence requirements of
applicable laws, rules and regulations, and concluded that the provision of each service or type of service would not impair the
independence of EY.
A description of the Board Audit Committee’s pre-approval policies and procedures is set out in the Assurance and Control
section on page 84. A copy of EY’s independence declaration is set out on page 156.
114 National Australia Bank
Remuneration Report
Letter from the People & Remuneration
Committee Chair, Anne Loveridge
Dear Fellow Shareholders,
On behalf of the Board, I am pleased to present the
2023 Remuneration Report. Our results reflect the continued
disciplined execution of the Group's long-term strategy to
serve customers well and help our communities prosper. The
Group CEO and Group Executives performed well in challenging
conditions to deliver the Group's business plan.
Performance in 2023
In 2023, the Group CEO and Group Executives were supported
by our 38,000 colleagues to deliver safe, sustainable growth
and better outcomes for customers and colleagues. Key
outcomes in 2023 include:
• Strong financial performance with cash earnings of
$7.73 billion(1). This resulted in improved shareholder returns
through a total dividend paid of 161 cents per share, fully
franked for the year ended 30 September 2023.
Remuneration for the Group CEO and Group
Executives in 2023
The Group CEO and Group Executives delivered another year
of strong results and progress on the Group strategy in 2023.
The Board demonstrated discipline in determining executive
remuneration outcomes and is focused on maintaining
responsible levels of executive remuneration.
Key remuneration outcomes in 2023 were:
• Group Performance Indicators (GPI) achieved at 90% of
target driven by strong cash earnings, good progress on
colleague initiatives and safe growth, partially offset by
some non-financial performance measures.
• The Group CEO's Annual Variable Reward (VR) outcome
was 108% of his target opportunity (72% of maximum),
recognising his leadership in delivering the Group strategy
and engaging with customers.
• Annual VR outcomes for Group Executives were 81% to 117%
of target (54% to 78% of maximum opportunity).
• No long-term VR vested in 2023 as the Group did not grant
• Reasonable market share growth in key categories
any long-term VR awards in 2018.
including Australia business deposits (excluding Financial
Institutions and Government), New Zealand home lending
and New Zealand household deposits(2). Market share
growth in Australia lending to Small & Medium Enterprises
was below plan.
• Net Promoter Score (NPS)(3) results were mixed. While NAB
remained #1 among the major Australian banks in one
segment, the Board recognises there is more work to be
done in this area. Further detail is in section 4.2.
• Colleague average engagement improved by 1% to
77%. This is pleasing and reflects our focus on the
colleague experience.
• Automation and digitisation of our business driven by
investment in new technologies, artificial intelligence and
resources. This contributed to productivity benefits of
$398 million.
• Action to keep the bank and customers safe through
disciplined risk management, AUSTRAC compliance,
continued investment in protection against financial crime
and strong balance sheet settings.
•
Investment in environmental initiatives including
business loans for customers investing in emission-
reducing technologies.
• The FR for three Group Executives will be increased in
FY24 to reflect their increased accountabilities following
changes in their portfolios and, for two individuals,
realignment to external market positioning. No change was
made to the FR for the Group CEO.
Further detail on the remuneration outcomes is in section 2.1.
Changes to the Group's remuneration frameworks
A decision in 2023 to change the executive remuneration
framework with effect from 1 October 2023 was approved by
the Board. The changes address the requirements of APRA's
Prudential Standard CPS 511 Remuneration (CPS 511). For the
Group CEO and Group Executives the changes were:
• The redesign of the Long Term Incentive (LTI) to give
material weight to non-financial measures. The LTI is
comprised of two equally weighted components being
the Long Term Equity Award (LTEA) component (which is
subject to a non-financial measure) and the Long Term
Variable Reward (LTVR) component (which is subject to a
financial measure);
•
Longer deferral periods for the Group CEO and Group
Executives to ensure long-term focus; and
• Strengthening of risk and conduct assessments aligned to
Additional detail about Group performance is in section 4.
our Group Risk Framework.
Remuneration for colleagues excluding the Group
CEO and Group Executives in 2023
Colleagues received an average Fixed Remuneration (FR)
increase of 4.6% effective January 2023. Progress was
made towards gender equality with an improvement of the
gender pay gap to 15.8%. Progress continues to be made
to addressing gender representation across the Group.
The Group successfully renegotiated the new Enterprise
Agreement (EA) in 2023, with 85% of colleagues who voted
voting in favour of the new EA. The new EA provides certainty
about pay and benefits, providing an average guaranteed FR
increase of 4.5% to eligible colleagues in January 2024 and
ongoing guaranteed increases in January 2025 and January
2026. Additional information about colleague benefits and
progress of key initiatives is provided in section 1.3.
As a result of the changes the maximum remuneration
opportunity for the Group CEO and Group Executives was
reduced by 11%. Further detail is provided in section 5.
To address the requirements of CPS 511, the colleague
remuneration framework was also reviewed, and modifications
were made to the Group's specialist incentive plans to
introduce materially weighted non-financial measures.
On behalf of the Board, I invite you to read this Remuneration
Report which will be presented for adoption at the 2023 AGM.
Anne Loveridge
People & Remuneration Committee Chair
9 November 2023
(1) Full detail on how cash earnings is defined, a discussion of non-cash earnings items and a full reconciliation of statutory net profit attributable to owners of the
Company is set out in the Financial Report on page 169.
(2) Further detail is provided in section 4.
(3) Net Promoter® and NPS® are registered trademarks and Net Promoter Score and Net Promoter Systems are trademarks of Bain & Company, Inc., NICE Systems, Inc., and
Fred Reichheld.
2023 Annual Report
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Remuneration Report (cont.)
Contents
Section 1 -
Our remuneration framework
Section 2 -
Section 3 -
Key executive remuneration
2023 outcomes
Our 2023 executive variable
remuneration plans
Section 4 -
Remuneration outcomes
Section 5 -
Executive remuneration in 2024
Section 6 -
Governance, risk and consequence
Section 7 -
Group CEO and Group Executive statutory
remuneration disclosures
Section 8 -
Non-executive director remuneration
Section 9 -
Loans, other transactions and
other interests
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121
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134
137
141
150
153
116 National Australia Bank
Remuneration Report (cont.)
Section 1 - Our remuneration framework
1.1 Strategic context for remuneration at NAB
Our Group strategy and remuneration principles
Our remuneration frameworks are informed by the Group strategy which focuses on customers and colleagues. Our
remuneration principles support the delivery of our strategic priorities as outlined below. The Group operates an executive
remuneration framework for the Group CEO and Group Executives, and a broader colleague remuneration framework. Our Group
strategy and remuneration principles are outlined below.
Through six underpinning principles, we seek to demonstrate how we approach remuneration to all stakeholders, including
our customers, regulators, communities and colleagues. We intend to be fair, appropriate, simple and transparent. The new
executive remuneration framework outlined in section 5 is governed by the Group strategy and Group remuneration principles.
These principles inform our Group remuneration framework, remuneration policy and remuneration structures.
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2023 Annual Report
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NAB Group StrategyGroup Scorecard Group Performance Indicators + Qualitative Assessment(cid:12)(cid:32)(cid:52)(cid:1)(cid:1970)(cid:41)(cid:28)(cid:41)(cid:30)(cid:36)(cid:28)(cid:39)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1) (cid:41)(cid:42)(cid:41)(cid:1174)(cid:1970)(cid:41)(cid:28)(cid:41)(cid:30)(cid:36)(cid:28)(cid:39)(cid:1)(cid:40)(cid:32)(cid:28)(cid:46)(cid:48)(cid:45)(cid:32)(cid:46)(cid:1) to deliver the (cid:8)(cid:45)(cid:42)(cid:48)(cid:43)(cid:1165)(cid:46)(cid:1)(cid:46)(cid:47)(cid:45)(cid:28)(cid:47)(cid:32)(cid:34)(cid:52)(cid:1)(cid:19)(cid:36)(cid:46)(cid:38)(cid:1)(cid:14)(cid:42)(cid:31)(cid:36)(cid:1970)(cid:32)(cid:45)Quality of performanceIndividual Scorecard (cid:10)(cid:41)(cid:31)(cid:36)(cid:49)(cid:36)(cid:31)(cid:48)(cid:28)(cid:39)(cid:1)(cid:17)(cid:32)(cid:45)(cid:33)(cid:42)(cid:45)(cid:40)(cid:28)(cid:41)(cid:30)(cid:32)(cid:1)(cid:1779)(cid:1)(cid:10)(cid:41)(cid:31)(cid:36)(cid:49)(cid:36)(cid:31)(cid:48)(cid:28)(cid:39)(cid:1)(cid:14)(cid:42)(cid:31)(cid:36)(cid:1970)(cid:32)(cid:45)Individual performance measuresRisk Employee Conduct How We WorkTarget OpportunityFR x Annual VR target %CustomersReinforce our commitment to customersColleagues(cid:7)(cid:28)(cid:36)(cid:45)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)appropriate reward to attract and retain the best peopleShareholdersAlign reward with sustainable shareholder valueTransparentSimple and easy to understandSafe(cid:19)(cid:32)(cid:1971)(cid:32)(cid:30)(cid:47)(cid:1)(cid:45)(cid:36)(cid:46)(cid:38)(cid:1154)(cid:1)reputation, conduct and values outcomesLong-termDrive delivery of long-term performanceNAB Group remuneration principlesCustomersReinforce our commitment to customersColleagues(cid:7)(cid:28)(cid:36)(cid:45)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)appropriate reward to attract and retain the best peopleShareholdersAlign reward with sustainable shareholder valueTransparentSimple and easy to understandSafe(cid:19)(cid:32)(cid:1971)(cid:32)(cid:30)(cid:47)(cid:1)(cid:45)(cid:36)(cid:46)(cid:38)(cid:1154)(cid:1)reputation, conduct and values outcomesLong-termDrive delivery of long-term performanceNAB Group remuneration principles
Remuneration Report (cont.)
1.2 Executive remuneration framework in 2023
The Group remuneration principles inform the remuneration framework for the Group CEO and Group Executives. The framework
reinforces our commitment to customers, aligns with sustainable shareholder value creation and reflects risk, reputation,
conduct, sustainability and values (How We Work) outcomes. The framework supports the Group CEO and Group Executives
to drive both short and long term performance. The requirement to hold a minimum shareholding enhances the alignment
between the interests of shareholders and the Group CEO and Group Executives. The diagram below illustrates the executive
remuneration framework that applied to the Group CEO and Group Executives in 2023.
A decision in 2023 to change the executive remuneration framework with effect from 1 October 2023 was approved by the Board.
Further information about the change is provided in section 5. Accordingly, the executive remuneration framework illustrated
above ceased to apply on 30 September 2023.
118 National Australia Bank
0% – 112.5%for Group Chief Risk Officer0% – 150%for Group CEO and Group Executives130%for Group CEO and Group ExecutivesBoard discretion applies for qualitative matters including risk, reputation, conduct and values to ensure sustainable performance (including for malus and clawback)Fixed RemunerationAnnual VR (cash)Annual VR (deferred rights)Long-Term Variable RewardSet to attract and retainEarned for delivery of annual goals that drive the Group’s strategyAlign remuneration with long-term shareholder outcomes• FR was comprised of base salary and superannuation• Paid regularly during the financial year• Set at a market competitive level for their role and experience• Reviewed annually against the ASX20 and other relevant national and international financial services companies • 50% cash• 50% deferred rights (12.5% scheduled to vest at the end of year 1, year 2, year 3 and year 4)• Dividend equivalent payment for any vested deferred rights at the end of each deferral period• Quantum ranges (% of FR):• Outcomes vary depending on Group(1) and individual performance (balanced scorecard including risk goals), values and behaviours• Eligibility and award value determined by the Board• Subject to NAB’s Total Shareholder Return (TSR) result against a financial services peer group(3)• 100% performance rights• Subject to four year performance hurdle• No dividend equivalent payments made for any vested performance rights • Maximum award value (% of FR)(2)WHYAt RiskPerformance Year (2023)2024-20272026WHATHOWFixed Remuneration (FR)Annual Variable Reward (VR)Long-Term Variable Reward (LTVR)Minimum shareholding requirementNo change was made to the executive minimum shareholding requirement in 2023.To align with shareholder interests, executives are required to hold NAB shares to the value of two times FR (for the Group CEO) and one times FR (for Group Executives). Newly appointed executives are required to satisfy the minimum shareholding requirement within a five-year period from the date of commencement in their role.The value of an executive’s shareholding is based on the share price on the last day of the financial year (i.e., 30 September). The Group CEO and Group Executives have either met or are on track to meet their minimum shareholding requirement.Holdings included in meeting the minimum shareholding requirement are NAB shares, unvested deferred shares and deferred rights not subject to further performance conditions held by the executive, and shares held by a closely related party or self-managed superannuation fund for the benefit of the executive.(1) The outcome for the Managing Director and CEO, Bank of New Zealand (BNZ) will vary depending on overall Group and BNZ performance.(2) The actual value delivered to the Group CEO or a Group Executive is subject to the level of achievement against the performance hurdle and NAB’s share price at the time of vesting.(3) For the LTVR allocated in February 2023, the financial services peer group was AMP Limited, Australia and New Zealand Banking Group Limited, Bank of Queensland Limited, Bendigo and Adelaide Bank Limited, Commonwealth Bank of Australia, Macquarie Group Limited, Suncorp Group Limited and Westpac Banking Corporation.
Remuneration Report (cont.)
1.3 Colleague remuneration framework
Informed by our remuneration principles, the colleague remuneration framework as outlined below applies to colleagues below
the Group Executive level.
Enhancements to the colleague remuneration framework
In 2023 we reviewed the colleague remuneration framework to ensure compliance with the regulatory requirements introduced
by CPS 511. The enhancements to the colleague remuneration framework were informed by an independent review of the Group
remuneration framework, performance management framework and consequence management practices completed in June
2022. We continued our focus on embedding simplification and standardisation through a compliant, cost effective and market
aligned approach.
Colleague benefits and initiatives
NAB provides a broad range of benefits including financial and other wellbeing benefits to all colleagues. This includes training
and education such as the CQiB qualifications which more than 14,500 colleagues have completed, data analytics and digitisation
training, flexible work arrangements, up to two days of volunteer leave per year, and wellness and mental health resources
through our Employee Assistance Program.
In 2023 the Group successfully renegotiated the new EA by undertaking extensive negotiations and colleague engagement. The
new EA provides certainty about pay and a range of additional benefits to colleagues including one week of You Leave every
year to eligible colleagues. The FR increase for 2024 for eligible colleagues below Group Executive level is based on colleagues'
current FR as outlined below:
•
•
•
•
FR below $110,300: Colleagues will receive a 5% FR increase.
FR of $110,300 - $140,000: Colleagues will receive a minimum FR increase of 3.5%.
FR of $140,001 - $185,925: Colleagues will receive a minimum FR increase of 2.5%.
FR above $185,925: A budget of 3% of FR has been allocated to these colleagues and will be distributed based on individual
performance, internal peer relatives and external market remuneration positioning.
Progress was made on other key colleague initiatives including:
•
refinement of our "Ways of Working" to ensure workloads are manageable and colleagues have the support and resources
required to perform their role.
2023 Annual Report
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Colleagues appointed to Group 1 – 6 roles (1)Colleagues appointed to Group 3 – 6 roles (1)Certain colleagues appointed to Group 5 and 6 roles (1)• FR is comprised of base salary and superannuation• Paid regularly during the financial year• In addition to FR, a $1,000 share or cash grant to eligible colleagues in Group 1 – 5 roles will be made after the end of the financial year(3)• Cash and restricted shares (where the Annual VR outcome meets the relevant deferral threshold) (2)• Cash component paid at the end of the financial year• Restricted shares are allocated at the end of the financial year and vest over the deferral period applicable to the colleague’s role• 100% restricted shares (1/3 scheduled to vest at the end of year 1, year 2 and year 3)• Allocated at the end of the financial year based on a pre-grant assessment of individual performance and conduct during the year• Market competitive remuneration for role and experience to attract and retain high performing individuals • Only component of remuneration for some colleagues, providing certainty and encouraging stronger focus on customers• The $1,000 share or cash grant recognises colleague contribution to Group performance in 2023• To reward contribution to delivery of annual goals that drive the Group’s strategy• Motivates performance and safe growth for colleagues who have increased accountability for and influence over the Group’s annual performance• Variable reward targets have been standardised to create more consistency and fairness• To create shareholder alignment, drive continued sustainable performance and emphasise focus on risk management, good conduct and behaviour outcomesWHOWHATWHYFixed Remuneration (FR)Annual Variable Reward (VR)Annual Equity AwardBoard discretion applies for qualitative matters including risk, reputation, conduct and values to ensure sustainable performance (including for malus and clawback)At Risk(1) Roles are defined in the NAB Enterprise Agreement 2023. Group 1 - 6 roles are roles below the Group CEO and Group Executives (which are Group 7 roles).(2) Deferral thresholds and deferral periods are different depending on the incentive plan participated in and the seniority of the colleague.(3) The grant of shares or cash and value of the award is determined by the Board each year in its discretion.
Remuneration Report (cont.)
• embedding our Distinctive Leadership tools and practices through continued focus on building clear, capable and motivated
leaders who drive positive change. 92% of leaders have now completed the Distinctive Leadership Program.
• continued focus during our annual performance and reward review process to ensure people leaders address gender pay
equity through the performance and reward decisions they make. NAB’s gender pay gap(1) decreased to 15.8% in 2023 (16.9% in
2022)(2).
•
following the implementation of Reshaping Reward in 2021 and 2022 which simplified and standardised our reward offering, we
continued to focus on our recognition program as a mechanism to continue to drive a positive culture.
• compliance with legislated Superannuation Guarantee Contribution changes that support a long-term benefit focus, together
with awards being made under our $1,000 share or cash grant supporting long term value creation for colleagues.
(1) The pay gap analysis indicates NAB’s gender pay gap when comparing the base salary of all females to males within the Australian-based workforce of NAB for the
reporting period 1 April 2022 to 31 March 2023. The ratio is calculated by dividing the female average salary by the male average salary per employment level. It does not
separately measure the gender pay gap in equivalent roles. Analysis includes permanent, fixed term, and casual colleagues and excludes contractors.
(2) The 2022 Remuneration Report included a typographic error that recorded the gender pay gap as 10.9% instead of 16.9%.
120 National Australia Bank
Remuneration Report (cont.)
Section 2 - Key executive remuneration 2023 outcomes
2.1 Executive remuneration outcomes in 2023
Fixed Remuneration
2023 Fixed Remuneration outcomes
2023 Performance
and Annual
VR outcomes
As disclosed in our 2022 Remuneration Report, the Board approved a FR increase of 2.5% for the Group Chief Risk
Officer and 2% for the other Group Executives effective from 4 January 2023.
2023 Annual VR outcomes
The Board considered performance across all elements of the scorecard, which reflected another year of good
results and disciplined execution of strategic initiatives.
The Board determined that a GPI outcome of 90% appropriately reflected the mix of strong and partial
achievements. The GPI outcome reflected good cash earnings, progress on colleague initiatives and safe
growth, partially offset by some non-financial performance measures (see section 3.1). In arriving at this
outcome, the Board considered the sustained improvements in the management of risk and progress against
strategy, customer outcomes and sustainability priorities.
The 2023 Annual VR outcomes were:
The five-year overview below shows modest Annual VR outcomes when compared to the maximum VR
opportunity available. The level of variation in the outcomes for the Group CEO and Group Executives reflects
appropriate pay for performance alignment.
2018 Long-Term
VR outcomes
There was no LTVR vesting in 2023 as NAB did not grant any LTVR awards in relation to the 2018 performance
year. The following table provides a five-year overview of the vesting outcomes of long-term VR awards. Further
details on awards are provided in section 4.4.
The 2023 executive remuneration framework ceased to operate on 30 September 2023. The new 2024 executive Remuneration
Framework commenced on 1 October 2023. Further details are provided in section 5.
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2023 Annual Report
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Individual Annual VR outcomesPosition% of FR% of Target Opportunity% of Maximum OpportunityGroup CEO108%108%72%Group Executives81% – 117%81% – 117%54% – 78%% of Annual VR maximum opportunityPosition20232022202120202019Group CEO72%74%81%0%0%Group Executives54% – 78%62% – 74%70% – 99%0%0%Plan Terms20182017201620152014Allocation dateNo long term VR awards were granted in 2018December 2017February 2017March 2016February 2015Performance period4 years4 years4 years5 yearsDate of testingNov 2021Nov 2020Nov 2019Nov 2018Number of Group Executives (including the Group CEO) who held the award(1)5324% of award vested65.7%55.8%37.6%34.5%% of award lapsed34.3%44.2%62.4%65.5%(1) Number of Group Executives (including the Group CEO) who held the award and were a Group Executive on the vesting date
Remuneration Report (cont.)
2.2 Group executive appointments and exit arrangements
The following table outlines the remuneration arrangements for Group Executives as a result of role changes in 2023. Further
details are provided in section 2.3.
Group Executive
Remuneration arrangement
Nathan Goonan, Group Chief
Financial Officer
(appointed 1 July 2023,
ceased to be the Group
Executive, Strategy and
Innovation on 30 June 2023)
Gary Lennon, Group
Executive, Special Projects
(ceased to be Group Chief
Financial Officer on 1 July
2023, retired on 1 October
2023)(1)
Sarah White, Group
Executive People
and Culture
(appointed 18 August 2023)(2)
• Mr Goonan was previously the Group Executive, Strategy and Innovation.
• As an existing Group Executive, Mr Goonan’s remuneration on appointment aligned to the 2023
executive remuneration framework. Effective from his appointment, Mr Goonan's remuneration
comprised of annual FR of $1,127,500 with Annual VR maximum opportunity of 150% of FR and an LTVR
maximum opportunity of 130% of FR.
• Mr Lennon retired from NAB on 1 October 2023. In accordance with the terms of NAB’s VR programs,
Mr Lennon retained all unvested deferred short-term and long-term VR awards. The awards remain
subject to the relevant performance measures and restriction periods.
• Mr Lennon remained eligible to participate in the FY23 Annual VR plan. Mr Lennon’s Annual VR will be
delivered in cash (50%) and deferred cash (50%), vesting in four equal annual tranches.
• On retirement, Mr Lennon received a payment in respect of statutory entitlements and in recognition
of his contribution to the Group. Payments made in connection with Mr Lennon's retirement complied
with the termination benefits regime in the Corporations Act 2001 (Cth).
• Ms White was previously the Chief of Staff to the Group CEO.
• Due to the timing of her appointment, Ms White was provided with remuneration under the 2024
executive remuneration framework. Her remuneration is comprised of annual FR of $900,000 with
Annual VR maximum opportunity of 100% of FR and LTI opportunity of 140% of FR (comprising the LTEA
component of 70% of FR and the LTVR component of 70% of FR). Further information about the 2024
executive remuneration framework is provided in section 5.
• Ms White’s 2023 Annual VR outcome was based on her performance in her previous role.
Susan Ferrier, Group
Executive People
and Culture
• Ms Ferrier retired from NAB on 31 October 2023. In accordance with NAB’s VR programs, Ms Ferrier
retained all unvested recognition award shares and all unvested deferred short-term and long-term
VR awards. The awards remain subject to the relevant performance measures and restriction periods.
(ceased to be Group
Executive People and
Culture on 17 August 2023,
retired on 31 October 2023)(3)
• Ms Ferrier remained eligible to participate in the FY23 Annual VR plan. Ms Ferrier's Annual VR will
delivered in cash (50%) and deferred cash (50%), vesting in four equal annual tranches.
• On retirement, Ms Ferrier received a payment in respect of statutory entitlements, support for
transition to her retirement and in recognition of her contribution to the Group. Payments made
in connection with Ms Ferrier's retirement complied with the termination benefits regime in the
Corporations Act 2001 (Cth).
(1) Mr Lennon was appointed as Group Executive, Special Projects for the period 1 July 2023 to 30 September 2023. He ceased to be a KMP and member of the ELT on
30 September 2023. He retired on 1 October 2023.
(2) Ms White did not participate in the Annual VR program from 18 August 2023 to 30 September 2023, when she was appointed Group Executive People and Culture, and did
not receive an Annual VR award in respect of this period. Consistent with the 2024 executive remuneration framework, Ms White will participate in the Annual VR plan and
will receive an LTI award (comprising the LTEA component and LTVR component) in 2024.
(3) Ms Ferrier remained employed by NAB during the period 18 August 2023 to 31 October 2023 to transition functional accountability to Ms White. She was not a KMP or a
member of the Executive Leadership Team in this period. Ms Ferrier retired on 31 October 2023.
Group executive changes
Ms Mentis' announced her retirement at the end of FY23. Accordingly, her portfolio was reallocated to Mr Matheson from
1 November 2023. The table below outlines the change in his remuneration arrangements. Further details are provided in
section 2.3.
Group Executive
Remuneration arrangement
Les Matheson, Group Executive
Digital, Data and Chief
Operating Officer
(appointed 1 November 2023,
ceased to be Group
Chief Operating Officer on
31 October 2023)
Angela Mentis, Group Chief
Digital, Data and Analytics Officer
(retired and ceased to be Group
Chief Digital, Data & Analytics
Officer on 31 October 2023)
• Mr Matheson was previously the Group Chief Operating Officer.
• As the appointment occurred within the 2024 financial year, Mr Matheson's appointment aligned
to the 2024 executive remuneration framework. On appointment, his remuneration comprised of
annual FR of $1,150,000 with an Annual VR maximum opportunity of 100% of FR and LTI opportunity of
140% of FR (comprising the LTEA component of 70% of FR and the LTVR component of 70% of FR).
• Ms Mentis retired from NAB on 31 October 2023. In accordance with the terms of NAB’s VR
programs, Ms Mentis retained all unvested deferred short-term and long-term VR awards. The
awards remain subject to the relevant performance measures and restriction periods.
• Ms Mentis remained eligible to participate in the FY23 Annual VR plan. Ms Mentis' Annual VR will be
delivered in cash (50%) and deferred cash (50%), vesting in four equal annual tranches.
• On retirement, Ms Mentis received a payment in respect of statutory entitlements and in
recognition of her contribution to the Group. Payments made in connection with Ms Mentis'
retirement complied with the termination benefits regime in the Corporations Act 2001 (Cth).
122 National Australia Bank
Remuneration Report (cont.)
2.3 Key management personnel
The list of NAB's Key Management Personnel (KMP) is assessed each year and comprises of the non-executive directors of
NAB, the Group CEO (an executive director of NAB) and the Group Executives who represent employees of the Group and have
authority and responsibility for planning, directing and controlling the activities of both NAB and the Group. The KMP during
2023 were:
Name
Non-executive directors
Philip Chronican
David Armstrong
Kathryn Fagg
Christine Fellowes(1)
Peeyush Gupta
Carolyn Kay(2)
Alison Kitchen(3)
Anne Loveridge
Douglas McKay
Simon McKeon
Ann Sherry
Group CEO
Ross McEwan
Group Executives
Sharon Cook
Shaun Dooley
Susan Ferrier(4)
David Gall
Nathan Goonan(5)
Daniel Huggins(6)
Andrew Irvine
Gary Lennon(7)
Les Matheson(8)
Angela Mentis(9)
Rachel Slade
Patrick Wright
Sarah White(10)
Position
Chair
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Group Chief Executive Officer and Managing Director
Group Executive, Legal and Commercial Services
Group Chief Risk Officer
Group Executive, People and Culture (to 17 August 2023)
Group Executive, Corporate and Institutional Banking
Group Executive, Strategy and Innovation (to 30 June 2023)
Group Chief Financial Officer (from 1 July 2023)
Managing Director and CEO of Bank of New Zealand
Group Executive, Business and Private Banking
Group Chief Financial Officer (to 30 June 2023)
Group Executive, Special Projects (from 1 July 2023)
Group Chief Operating Officer
Group Chief Digital, Data and Analytics Officer
Group Executive, Personal Banking
Group Executive, Technology and Enterprise Operations
Group Executive, People and Culture (from 18 August 2023)
Term as KMP
Full year
Full year
Full year
Part year
Full year
Part year
Part year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Part year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Part year
(1) Christine Fellowes' appointment was effective 5 June 2023. She will stand for election at the 2023 Annual General Meeting.
(2) Carolyn Kay's appointment was effective 31 July 2023. She will stand for election at the 2023 Annual General Meeting.
(3) Alison Kitchen's appointment was effective 27 September 2023. She will stand for election at the 2023 Annual General Meeting.
(4) Susan Ferrier ceased to be a KMP and member of the Executive Leadership Team on 17 August 2023. She remained an employee of NAB until 31 October 2023.
(5) As announced on 21 March 2023, Nathan Goonan commenced as Group Chief Financial Officer from 1 July 2023.
(6) All matters relating to the remuneration of Daniel Huggins including VR, have been approved by the BNZ Board as required under BNZ's Conditions of Registration which
are set by the Reserve Bank of New Zealand.
(7) Gary Lennon ceased to be a KMP and member of the Executive Leadership team on 30 September 2023 and retired on 1 October 2023.
(8) As announced on 5 October 2023, Les Matheson commenced as Group Executive Digital, Data and Chief Operating Officer on 1 November 2023.
(9) Angela Mentis retired and ceased to be a KMP and member of the Executive Leadership Team following the end of FY23 on 31 October 2023.
(10) Sarah White's appointment was effective 18 August 2023.
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2023 Annual Report
123
Remuneration Report (cont.)
Section 3 - Our 2023 executive variable reward plans
The 2023 executive remuneration framework (including the executive variable reward plans described below) applied for 2023
and ceased to operate on 30 September 2023. From 1 October 2023, the new executive remuneration framework, as described in
section 5, came into effect for the Group CEO and Group Executives.
3.1 Annual variable reward for 2023
The table below outlines the key features of the 2023 Annual VR plan for the Group CEO and Group Executives.
Feature
Purpose
Annual VR
opportunity
Group
performance
Description
Annual VR rewards the Group CEO and Group Executives for delivery of annual goals that drive long-term sustainable
performance. It provides an appropriate level of remuneration that varies based on the Board’s determination of
Group and individual performance over the financial year measured against agreed targets for financial and non-
financial measures that are set to drive delivery of the Group's strategy. The plan is not wholly formulaic. Judgement
is applied through qualitative assessment as determined by the Board.
Position
Group CEO and Group Executives
(excluding Group Chief Risk Officer)
Group Chief Risk Officer
Target opportunity
Maximum opportunity
100% of FR
75% of FR
150% of FR
112.5% of FR
Group performance is assessed on achievement of financial and non-financial measures (GPI) linked to the Group's
key strategic priorities, overlaid by a qualitative assessment. The qualitative assessment may result in the outcome
being adjusted upwards or downwards (including to zero) for risk, quality of performance (including consideration
of financial and customer outcomes, sustainability matters, and progress made against strategy) and any other
matters as determined by the Board. Further detail on the 2023 GPI and outcome is provided in section 4.1.
Individual
performance
and measures
Individual performance is assessed against a scorecard comprised of key financial and non-financial goals. The
weighting of measures reflects the responsibilities for each individual's role. The Group CEO's 2023 scorecard is
aligned to the GPI.
Individual performance modifiers: The Board considers three individual performance modifiers which may result in
an adjustment to individuals’ performance and VR outcomes:
•
•
Risk: the individual's management of risk and compliance
Employee conduct: individual performance and VR outcomes may be reduced where expected standards of
conduct are not met
• How We Work: the individual's demonstration of NAB’s values
Individual Annual VR awards for the Group CEO and Group Executives(1) are calculated as follows:
Annual VR
calculation
Award
delivery and
deferral
Discretionary adjustments: Annual VR is discretionary and will vary in line with Group and individual performance and
available funding. The Board may determine any amount be awarded from zero up to the maximum VR opportunity.
The Group CEO's 2023 scorecard, assessment and outcomes are provided in section 4.2.
Annual VR is delivered as a combination of cash and deferred rights. The cash component of Annual VR is paid
following the performance year to which it relates.
Deferred rights are granted in February 2024 and are scheduled to vest pro-rata over four years from grant. Deferred
rights are granted and may vest by the Board at its discretion, subject to the relevant plan rules including malus and
clawback provisions.
A dividend equivalent payment for any vested deferred rights is paid at the end of each deferral period.
Separation
If the Group CEO or Group Executive resigns, they will not receive any Annual VR for that year and any unvested
deferred rights will be forfeited.
Unvested awards may be retained on separation in other circumstances prior to the end of the vesting period. The
Board retains discretion to determine a different treatment. Vesting of any unvested awards retained will generally
not be accelerated and will continue to be held by the individual on the same terms.
Board
discretion
The Board has extensive discretion in respect of the Annual VR awarded. Further detail on governance of Annual VR is
outlined in section 6.2.
(1) All matters relating to the remuneration of Daniel Huggins, Managing Director and CEO BNZ, including scorecard measures and performance assessment, have been
approved by the BNZ Board as required under BNZ's Conditions of Registration which are set by the Reserve Bank of New Zealand. Daniel Huggins’ Annual VR is calculated
as VR Target Opportunity x (50% Group performance + 50% BNZ performance) x Individual Performance Score. BNZ performance is assessed based on Customer (30%);
Colleagues (12.5%); Safe Growth (7.5%) and Financial (50%). The assessed overall BNZ performance for 2023 was 100%.
124 National Australia Bank
5%ColleaguesGroup CEOGroup Executives20%20%20%60%20%20%15%20%Risk*(cid:938)(cid:215)(cid:385)(cid:342)(cid:978)(cid:30)(cid:444)(cid:271)(cid:483)(cid:335)(cid:967)(cid:491)(cid:978)(cid:271)(cid:491)(cid:491)(cid:342)(cid:491)(cid:491)(cid:431)(cid:342)(cid:433)(cid:503)(cid:978)(cid:444)(cid:369)(cid:978)(cid:503)(cid:385)(cid:342)(cid:978)(cid:73)(cid:483)(cid:444)(cid:519)(cid:480)(cid:978)(cid:31)(cid:46)(cid:147)(cid:967)(cid:491)(cid:978)(cid:483)(cid:390)(cid:491)(cid:410)(cid:978)(cid:444)(cid:519)(cid:503)(cid:328)(cid:444)(cid:431)(cid:342)(cid:978)(cid:390)(cid:491)(cid:978)(cid:271)(cid:480)(cid:480)(cid:414)(cid:390)(cid:342)(cid:335)(cid:978)(cid:271)(cid:491)(cid:978)(cid:271)(cid:433)(cid:978)(cid:86)(cid:433)(cid:335)(cid:390)(cid:547)(cid:390)(cid:335)(cid:519)(cid:271)(cid:414)(cid:978)(cid:133)(cid:444)(cid:335)(cid:390)(cid:572)(cid:342)(cid:483)(cid:920)FinancialCustomersSafe GrowthNAB Group StrategyGroup Scorecard Group Performance Indicators + Qualitative Assessment(cid:12)(cid:32)(cid:52)(cid:1)(cid:1970)(cid:41)(cid:28)(cid:41)(cid:30)(cid:36)(cid:28)(cid:39)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1) (cid:41)(cid:42)(cid:41)(cid:1174)(cid:1970)(cid:41)(cid:28)(cid:41)(cid:30)(cid:36)(cid:28)(cid:39)(cid:1)(cid:40)(cid:32)(cid:28)(cid:46)(cid:48)(cid:45)(cid:32)(cid:46)(cid:1) to deliver the (cid:8)(cid:45)(cid:42)(cid:48)(cid:43)(cid:1165)(cid:46)(cid:1)(cid:46)(cid:47)(cid:45)(cid:28)(cid:47)(cid:32)(cid:34)(cid:52)(cid:1)(cid:19)(cid:36)(cid:46)(cid:38)(cid:1)(cid:14)(cid:42)(cid:31)(cid:36)(cid:1970)(cid:32)(cid:45)Quality of performanceIndividual Scorecard (cid:10)(cid:41)(cid:31)(cid:36)(cid:49)(cid:36)(cid:31)(cid:48)(cid:28)(cid:39)(cid:1)(cid:17)(cid:32)(cid:45)(cid:33)(cid:42)(cid:45)(cid:40)(cid:28)(cid:41)(cid:30)(cid:32)(cid:1)(cid:1779)(cid:1)(cid:10)(cid:41)(cid:31)(cid:36)(cid:49)(cid:36)(cid:31)(cid:48)(cid:28)(cid:39)(cid:1)(cid:14)(cid:42)(cid:31)(cid:36)(cid:1970)(cid:32)(cid:45)Individual performance measuresRisk Employee Conduct How We WorkTarget OpportunityFR x Annual VR target %
Remuneration Report (cont.)
3.2 Long-term variable reward allocated in 2023
The table below outlines the key features of the LTVR award allocated in February 2023 for the Group CEO and Group Executives.
From 1 October 2023, the Group CEO and Group Executives will be awarded a Long Term Incentive (LTI) award under the new
executive remuneration framework. The LTI award (comprising the LTEA and LTVR components) will be granted in February 2024
(subject to shareholder approval for the grant to the Group CEO). Further information about the new executive remuneration
framework is provided in section 5.
Feature
Purpose
Participants
Award value
Description
LTVR awards were granted by the Board to encourage long-term decision making critical to creating long-
term value for shareholders. They were determined and awarded independently from Annual VR decisions.
Group CEO and Group Executives as determined by the Board.
The maximum face value of the LTVR award was 130% of FR for the Group CEO and Group Executives. The
value of the LTVR granted was determined by the Board. The Board considered the Group's and the relevant
participant's performance when determining the LTVR granted to the participant.
The actual value delivered to each participant is subject to the level of achievement against the
performance measure and may be zero if the performance measure is not achieved.
Instrument
The LTVR award was provided as performance rights.
Each performance right entitles its holder to receive one NAB share at the end of the four year
performance period, subject to the performance measure being satisfied.
Allocation approach
The number of performance rights granted was calculated by dividing the LTVR award face value by NAB's
weighted average share price over the last five trading days of the financial year. The weighted average
share price used for the 2023 LTVR award, which was allocated on 23 February 2023, was $29.11.
Grant date
The LTVR award was granted on 23 February 2023.
Performance period
Four years from 15 November 2022 to 15 November 2026.
Performance measure
TSR measures the return that a shareholder receives through dividends (and any other distributions)
together with capital gains over a specific period. For the purposes of calculating TSR over the
performance period, the value of the relevant shares on the start date and the end date of the
performance period are based on the volume weighted average price of those shares over the 30 trading
days up to and including the relevant date.
NAB's TSR is measured against the TSR peer group to determine the level of vesting:
NAB's relative TSR outcome
Level of vesting
Below 50th percentile
At 50th percentile
0%
50%
Between 50th and 75th percentiles
Pro-rata vesting from 50% to 100%
At or above 75th percentile
100%
The TSR peer group is AMP Limited, Australia and New Zealand Banking Group Limited, Bank of Queensland
Limited, Bendigo and Adelaide Bank Limited, Commonwealth Bank of Australia, Macquarie Group Limited,
Suncorp Group Limited and Westpac Banking Corporation. No change was made from the prior year.
TSR outcomes are calculated by an independent provider.
The performance measure is not retested. Any performance rights that have not vested after the end of
performance period will lapse in December 2026.
No dividends are paid throughout the vesting period or in respect of vested performance rights.
The treatment of performance rights will depend on the reason for separation:
•
Resignation: performance rights will be forfeited in full
• All other circumstances including retrenchment and retirement: the performance rights will be retained
in full unless otherwise determined by the Board in its absolute discretion(1)
Any performance rights a participant continues to hold will remain subject to the performance measure,
with the measure being tested in accordance with the normal timetable.
The Board has extensive discretion in respect of the LTVR, including the initial value granted, the amount
of performance rights that vest and any forfeiture or clawback applied. Further detail is provided in
section 6.2.
Testing
No retesting
Dividends
Separation
Board discretion
(1) For example, if the participant retires prior to the end of the financial year in which the performance rights are granted, generally the Board will exercise its
discretion to allow the participant to retain a pro-rata portion of the performance rights reflecting the proportion of the LTVR performance period served when the
retirement occurs.
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2023 Annual Report
125
Remuneration Report (cont.)
3.3 Remuneration mix
The 2023 remuneration mix for the Group CEO and Group Executives at maximum opportunity aimed to deliver approximately
three-quarters of total remuneration as variable and 'at risk' remuneration. The actual remuneration mix for the Group CEO and
each Group Executive is subject to Group(1) and individual performance each year.
3.4 Long-term alignment of remuneration
The executive remuneration framework that applied in 2023 incorporated deferral to ensure shareholder alignment and a focus
on continued, sustainable performance. A proportion of remuneration is deferred in the form of equity for up to four years. This
encourages long-term decisions which are critical to creating sustainable value for customers and shareholders. The Board
retains discretion to determine whether all or some variable reward (unvested, vested or paid) may be subject to malus and
clawback. See section 6.2 for more detail.
(1) The outcome for the Managing Director and CEO BNZ will vary depending on overall Group and BNZ performance.
126 National Australia Bank
Fixed remuneration Annual VR cash Annual VR deferred rights LTVRGroup CEO26%20%20%34%Group CRO30%16%16%38%Other Group Executives26%20%20%34%Deferred Rights allocatedPerformance Rights allocatedSubject to in-year adjustments, malus and clawback12.5%12.5%12.5%12.5%100%Vesting periodPerformance periodPerformance testingAllocation of awardsVestingDeferred Annual VRLong-Term VR20232024202520262027
Remuneration Report (cont.)
Section 4 - Remuneration outcomes
4.1 Group performance
The Board determined Group performance for 2023 based on the GPI outlined below. The 2023 GPI was determined as 90%. The
GPI is linked to the Group's key strategic priorities, and has regard to a qualitative assessment of risk, performance (including
consideration of financial, sustainability and customer outcomes, and progress made against strategy) and any other matters as
determined by the Board.
In 2023, when determining the GPI outcome, the Board considered a range of qualitative factors including progress on
sustainability matters. This included progress against sustainability priorities, support for customers (including affordable
housing, cost of living support and scam and fraud prevention), community initiatives, colleague engagement and gender
equality. Further detail on the sustainability matters in our performance and reward framework is provided in section 4.2.
The 2023 GPI outcomes were:
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2023 Annual Report
127
Group Performance IndicatorsReturn on Total Allocated Equity (25%)(expected loss basis)(1)13.15%Against plan of 12.93%Market Share (10%)(assessment of growth in business lending, home lending and deposits, across Australia and New Zealand)(8)20.04%Against plan of 20.07%Colleague Engagement Score (7.5%)(measures colleague engagement and motivation)77Against upper quartile target of 77Cash earnings (25%)(expected loss basis)(2)$7.64bnAgainst plan of $7.5 billionGender Equality (7.5%)Representation of women in Group 4-6 roles39%Against plan of 39.7%Intelligent Control Score (5%)(internal measure of the Group’s control environment)91Against target of 86.1 Outcome: Above Plan Outcome: Partially Met Outcome: At Target Outcome: Above Plan Outcome: Partially Met Outcome: Partially Met Outcome: Above Target(1)Return on Total Allocated Equity on an expected loss basis remains sensitive to changes in the risk profile of the Group’s portfolio.(2)Calculation of cash earnings on an expected loss basis provides a view that is reflective of long-term underlying business performance and is less volatile than cash earnings which includes the Credit Impairment Charge view, which in individual years can be impacted by large movements in economic adjustments and forward looking adjustments.(3)Net Promoter® and NPS® are registered trademarks and Net Promoter Score and Net Promoter Systems are trademarks of Bain & Company, Inc., NICE Systems, Inc. and Fred Reichheld.(4)Sourced from DBM Consumer Atlas (part of RFI Global), measured on 6 month rolling average to August 2023. Baseline is August 2022. Consumer NPS excludes consumers with Personal income of $260k+ and/or investible assets of $1m+. Ranking based on absolute scores, not statistically significant differences.(5)Sourced from DBM Business Atlas (part of RFI Global), measured on 6 month rolling average to August 2023. Baseline is August 2022. Business NPS is based on equal (25:25:25:25) combined weighting of NAB turnover segments: Micro (Up to $100k turnover), Small ($100k-$5m turnover), Medium ($5m-$50m turnover), Large ($50m+). Ranking based on absolute scores, not statistically significant differences.(6)Sourced from DBM Consumer Atlas (part of RFI Global), measured on 6 month rolling average to August 2023. Baseline is August 2022. Based on all consumers 18+, in either High Net Worth definition or Mass Affluent definition and on equal (50:50) combined weighting of included segments. Mass Affluent includes consumers with Personal income of $260k+ and/or investible assets less than $2.5m and/or investible assets $1m<$2.5m, High Net Worth includes consumers with investible assets of $2.5m+. Ranking based on absolute scores, not statistically significant differences.(7)Met target based on ranking in our target market, informed by an independent survey.(8)Each product line is assessed individually with overall market share assessment being the weighted sum of outcomes across all product lines. Market share targets per product are calibrated to the Annual Strategic and Financial Corporate Plan.-3Consumer(4) Against target of 2-9High Net Worth & Mass Affluent(6) Against target of +16Business(5) Against target of 2#1C&IB lead(7) Against target of being #1Strategic Net Promoter Score(3) (20%)(measures customer advocacy)
Remuneration Report (cont.)
As part of our governance process, the GPI outcome may be modified by the Board due to unsatisfactory risk or conduct
findings. The Group Risk Performance assessment, undertaken by the Group Chief Risk Officer, reviewed the Group’s practices
and presented the findings to the Board and the Board Risk and Compliance Committee.
Historical Group performance
The table below shows the Group's annual financial performance over the last five years and its impact on shareholder value,
taking into account dividend payments, share price changes, and other capital adjustments during the period.
Financial performance measure
Basic earnings per share (cents)
Cash earnings ($m)(1)
Dividends paid per share ($)
Company share price at start of year ($)
Company share price at end of year ($)
Absolute Total Shareholder Return - latest financial year
Absolute Total Shareholder Return - rolling four financial year period
2023
238.0
7,731
1.61
28.81
29.07
6.5%
14.9%
2022
219.3
7,104
1.40
27.83
28.81
8.6%
22.5%
2021
196.3
6,558
0.90
17.75
27.83
61.9%
6.9%
2020
112.7
3,710
1.13
29.70
17.75
(36.4%)
(11.5%)
2019
208.2
5,853
1.82
27.81
29.70
13.3%
29.6%
(1)
Information is presented on a continuing operations basis, unless otherwise stated. 2019 has been restated for the presentation of MLC Wealth as a discontinued
operation. No other comparative periods have been restated.
The table below summarises the variable reward outcomes for the Group CEO and Group Executives over the last five years,
including vesting of LTVR awards relating to prior periods.
Group CEO Annual VR (% of max. Annual VR)
Average Group Executives Annual VR (% of max. Annual VR)(1)
LTVR award - four year performance period (% of total award vested)(2)
LTVR award - five year performance period (% of total award vested)(4)
NAB's four year relative TSR (S&P/ASX50)(5)
NAB's four year relative TSR (Top Financial Services peer group)(5)(6)
NAB's five year relative TSR (S&P/ASX50)(5)
NAB's five year relative TSR (Top Financial Services peer group)(5)(6)
2023
72%
68%
n/a(3)
n/a
n/a
n/a(3)
n/a
n/a
2022
2021
2020
2019
74%
65%
66%
n/a
n/a
71st
n/a
n/a
81%
83%
56%
n/a
n/a
71st
n/a
n/a
0%
0%
38%
35%
23rd
57th
22nd
57th
0%
0%
0%
0%
20th
43rd
35th
43rd
(1) The maximum Annual VR opportunity has changed over time, consistent with the relevant Annual VR plan.
(2) The amount shown for 2022 is the portion of the total 2017 LTI award that vested and for 2021 is the portion of the total 2016 LTI award that vested. Both awards were
measured over a four year performance period, against relevant peer groups.
(3) NAB did not award any LTVR in 2018 and therefore there was no award to be tested for vesting in 2023.
(4) The amount shown for 2020 is the percentage of the total 2014 LTI award that vested. This award was measured over a five year performance period against relevant
peer groups.
(5) Measured over the performance period of the relevant LTVR award.
(6) The Top Financial Services peer group for all awards is: AMP Limited, Australia and New Zealand Banking Group Limited, Bank of Queensland Limited, Bendigo & Adelaide
Bank Limited, Commonwealth Bank of Australia, Suncorp Group Limited and Westpac Banking Corporation.
128 National Australia Bank
Remuneration Report (cont.)
4.2 Group CEO's performance
The table below shows the key 2023 performance measures for the Group CEO and Group Executives and the Board's assessment
of the Group CEO's performance against those measures. The measures were selected to support the Group strategy and are
underpinned by the GPI scorecard in section 4.1. The Board considers that the Group CEO and Group Executives have maintained
momentum in delivering the Group strategy and have delivered strong results against the Group's business plan in a challenging
and competitive economic environment.
Goal, objective and assessment
Financial: Deliver attractive returns, safe growth and the financial plan
Weighting
60%
Outcome
Achieved
Strong financial performance with above plan cash earnings and disciplined management of the
Group's balance sheet. The Group has maintained strong liquidity through 2023 with surpluses above
regulatory requirements.
•
Return on Total Allocated Equity (expected loss basis)(1) of 13.15% was 22 basis points higher than plan.
• Cash earnings (expected loss basis)(2) of $7,639 million was $117 million or 1.6% higher than plan.
• Market Share(3) below plan expectations.
•
Financial performance / profit growth reflects the continued, disciplined execution of our long-term
strategy targeting growth in higher returning segments while managing the impact of the higher interest
rate environment.
Customers: Deliver a great customer experience and grow customer advocacy
Continued support for our customers with a focus on vulnerable customers, customer complaint handling,
customer advocacy and our remediation program. Strategic NPS(4) results were disappointing and below
target in 3 out of 4 priority segments.
• C&IB NPS leads peers. This was at target(5).
• Consumer NPS was 3 points below the baseline of 0, with NAB ranked second among the major
Australian banks(6).
•
Business NPS was 10 points above baseline (-4), with NAB ranked second among the major
Australian banks(7).
• High Net Worth and Mass Affluent NPS was 6 points below baseline (-3), with NAB ranked third
among the major Australian banks(8). The HNW NPS segment ended 2023 ranked first among the major
Australian banks.
• Accelerating efforts to protect customers against scams and fraud via customer awareness and
education campaigns, and investing in biometric technologies, machine learning, 24/7 account
monitoring, working with telecommunications companies and delivering pro-active customer alerts.
• Continued improvement to complaints handling and resolution of remediation programs.
•
Increased climate and sustainable financing products including the NAB Agri Green Loan, business
finance for “green” equipment and new capability to provide equity funding in innovative early-stage
climate-related investments.
20%
Partially
Achieved
Colleagues: Lead cultural change through energy, positivity, simplicity and engaged colleagues
15%
Colleague engagement increased steadily throughout the year achieving an average colleague
engagement score of 77 for 2023, with a Q4 engagement spot score of 78, which was a top quartile
outcome(9). This reflects the work undertaken to realise our desired culture, including simplifying our
processes and prioritising workload management and well-being.
• Continued to embed effective leadership practices across the Group with 92% of leaders having
completed the Distinctive Leadership Program.
• Notable improvement (0.8% increase) in the representation of women in Leadership (Group 4 – 6) roles
was achieved but was slightly below target.
•
•
Implementation of the three-year EA comprehensively supported by the colleague vote.
Effective leadership of challenging talent market with reduced attrition and effective attraction of key
leadership roles and critical capabilities.
Partially
Achieved
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2023 Annual Report
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Remuneration Report (cont.)
Goal, objective and assessment
Safe Growth: Deliver the Group strategy with improved processes and controls across the Group
Improved management of the Group's obligations, risk and control environment and delivery against our
long-term strategy.
• Achieved an Intelligent Control Score (internal measure of the Group's control environment) of 91 against
a target of 86 (and a baseline of 81).
•
•
Strong momentum in innovation and partnerships highlighted by Instant Credit Decisioning and the
launch of NAB Stablecoin (tokenisation) with our world's first borderless transaction.
Effective execution against our Technology Modernisation plan.
• Good execution of Mergers and Acquisition integration agenda.
• Good progress against our sustainability and climate strategy which is outlined further in NAB’s
Climate Report (see below for additional information on the application of sustainability matters
within performance).
Outcome before application of modifier
Risk modifier: Regulatory, breach management, progress on matters of interest, losses associated with
operational events and remediation costs, reputation
• Maintained a stable risk profile in a volatile external environment, with a majority of Material Risk
Categories improved or stable and positive momentum on significant risk issues throughout 2023.
•
•
•
Increased focus on commitment to strengthening risk management and performance across the
organisation, driven by Group CEO personal sponsorship, a focus on safe growth, protecting customers,
improving risk management practices and disciplined management of compliance requirements,
Responses to challenges presented by increased fraud and scams managed effectively, resulting in the
average ‘speed of answer’ for calls to Fraud Operations significantly improving, the fraud and scams NPS
improving and complaints reducing.
Improvement in the Financial Crime risk profile including the on-schedule delivery of the AUSTRAC
Enforceable Undertaking Remedial Action Plan.
• Achieved highest RepTrak survey score in six years and third consecutive quarterly increase(10).
How We Work modifier: Individual conduct and demonstration of NAB's values
The Group CEO demonstrated the Group's values and supported the Group's desired culture.
• Continued focus on simplification and productivity.
• Consistently driving accountability and performance focus across all leadership segments.
•
•
•
Role modelled customer service behaviours with extensive engagement with key customers on a
regular basis.
Leadership across scams and fraud.
Purposeful and regular engagement with colleagues including a focus on celebrating colleague success
and encouraging colleagues to speak up and challenge the status quo.
• Demonstrated all leadership requirements and has improved the culture of accountability across
all colleagues.
Overall Outcome
The Group CEO's overall outcome was assessed as Highly Achieved reflecting his personal leadership
contribution internally on strategic matters and externally on matters of significance, as well as role-
modelling individual conduct and NAB's values.
Weighting
5%
Outcome
Highly
Achieved
Partially
Achieved
Achieved
Highly
Achieved
CEO: 108%
of target
72% of
maximum
opportunity
(1) Return on Total Allocated Equity on an expected loss basis remains sensitive to changes in the risk profile of the Group's portfolio. Statutory net profit for the period
amounted to $7,414 million.
(2) Calculation on an expected loss basis provides a view that is reflective of long-term underlying business performance and is less volatile than the Credit Impairment
Charge view which in individual years can be impacted by large movements in economic adjustments and forward looking adjustments.
(3) Market Share is assessed by each product individually. Products include Australia Home Lending (16%, APRA), New Zealand Home Lending (4%, RBNZ), Australia SME Lending
(27%, RBA), New Zealand Business Lending (3%, RBNZ), Australia Household Deposits (21%, APRA), New Zealand Household Deposits (4%, RBNZ), Australia Business Deposits
excluding Financial Institutions and Government (21%, APRA), New Zealand Business Deposits (4%, RBNZ). Market Share movement results are July 2022 to July 2023.
(4) Net Promoter® and NPS® are registered trademarks and Net Promoter Score and Net Promoter Systems are trademarks of Bain & Company, Inc., NICE Systems, Inc. and
Fred Reichheld.
(5) Met target based on ranking in our target market, informed by an independent survey.
(6) Sourced from DBM Consumer Atlas (part of RFI Global), measured on 6 month rolling average to August 2023. Baseline is August 2022. Consumer NPS excludes
consumers with Personal income of $260k+ and/or investible assets of $1m+. Ranking based on absolute scores, not statistically significant differences.
(7) Sourced from DBM Business Atlas (part of RFI Global), measured on 6 month rolling average to August 2023. Baseline is August 2022. Business NPS is based on equal
(25:25:25:25) combined weighting of NAB turnover segments: Micro (Up to $100k turnover), Small ($100k-$5m turnover), Medium ($5m-$50m turnover), Large ($50m+).
Ranking based on absolute scores, not statistically significant differences.
(8) Sourced from DBM Consumer Atlas (part of RFI Global), measured on 6 month rolling average to August 2023. Baseline is August 2022. Based on all consumers 18+, in
either High Net Worth definition or Mass Affluent definition and on equal (50:50) combined weighting of included segments. Mass Affluent includes consumers with
Personal income of $260k+ and/or investible assets less than $2.5m and/or investible assets of $1m<$2.5m, High Net Worth includes consumers with investible assets of
$2.5m+. Ranking based on absolute scores, not statistically significant differences.
(9) The Group's average colleague engagement increased to 77 over 2023, with a Q4 spot score of 78 in August 2023. This is based on the methodology adopted by Glint
(which conducts the Heartbeat survey). Top quartile is based upon Glint's client group (domestic and global, from all industries).
(10) RepTrak Score (0-100) is provided by The RepTrak Company. It is an independent measurement of company reputation among those familiar with NAB. Data is reported
on a quarterly basis.
130 National Australia Bank
Remuneration Report (cont.)
Sustainability within our remuneration framework
Our strategic ambition, to serve customers well and help communities prosper is reflected in the measures that determine
performance and remuneration across NAB. Sustainability related performance is part of this process and is applied within our
GPI and qualitative assessment of performance, as well as Group CEO, Group Executive and colleague scorecards.
The governance and oversight of how these measures are set, reviewed and linked to the Group CEO and Group Executives'
remuneration outcomes are in accordance with the Group's governance and oversight framework outlined in section 6.1.
Our approach has been consistent since 2020 when the new Group strategy was implemented.
Examples of Sustainability within our performance framework
The list below provides some examples of the types of sustainability related matters that have been incorporated into the
assessments of the Group CEO and Group Executives' performance in 2023. For specific Group Executives, sustainability related
measures are included within their individual performance scorecards.
• Positive customer outcomes: Including NPS measures, meaningful action on customer complaints, appropriate support for
customers experiencing vulnerability, actions taken to build customer awareness and reduce the impact of fraud and scams.
• Positive colleague outcomes: Colleague engagement, gender equality, inclusion and diversity.
• Progress against sustainability priorities:
– Climate change: Progress against existing, and establishing additional, sector decarbonisation targets; building
operational maturity and colleague capability; increasing support for customers through product and service development
and safe growth in environmental financing.
– Affordable and specialist housing: Progress against NAB’s affordable and specialist housing target and development of
NAB’s specialised customer proposition in target growth areas.
– Indigenous economic advancement: Progress against NAB’s Indigenous business strategy including growth of a
specialised banking team, and safe growth in financing to Indigenous businesses.
– Natural disaster support: Maturity of NAB’s customer and colleague disaster support process and national partnerships
implemented to drive meaningful philanthropic activity.
Individual performance modifiers for Risk and How We Work (conduct and values) also consider sustainability related matters, and
therefore may influence final assessed performance.
Further information on NAB’s approach to managing climate change and other sustainability related matters is provided in NAB’s
2023 Climate Report.
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2023 Annual Report
131
Remuneration Report (cont.)
4.3 In-year variable reward outcomes
Group CEO and Group Executives
The table below outlines the Annual VR outcome for the Group CEO and each Group Executive for 2023 compared to each
individual's maximum Annual VR opportunity. The variance in the individual scores reflects differences in performance against
individual scorecards.
Maximum
Annual VR
opportunity
Total
Annual VR
Annual VR
cash
VR
deferred
rights(1)
% of maximum
Annual VR
opportunity
Name
Group CEO
Ross McEwan
Group Executives
Sharon Cook
Shaun Dooley
Susan Ferrier(2)
David Gall
Nathan Goonan
Andrew Irvine
Gary Lennon
Les Matheson
Angela Mentis
Rachel Slade
Patrick Wright
Daniel Huggins(3)
Sarah White(4)
Total
$
$
$
$
3,750,000
2,700,000
1,350,000
1,350,000
1,460,625
1,383,750
1,220,733
1,845,000
1,690,500
1,845,000
1,691,250
1,614,375
1,845,000
1,845,000
2,306,250
1,701,291
-
920,194
871,763
659,195
1,383,750
1,065,015
1,439,100
1,166,963
1,065,488
1,217,700
1,328,400
1,591,313
1,216,481
-
460,097
435,882
329,597
691,875
532,507
719,550
583,482
532,744
608,850
664,200
795,657
608,241
-
460,097
435,881
329,598
691,875
532,508
719,550
583,481
532,744
608,850
664,200
795,656
608,240
-
24,198,774
16,625,362
8,312,682
8,312,680
%
72
63
63
54
75
63
78
69
66
66
72
69
72
n/a
69
(1) Due to the retirement of Susan Ferrier, Gary Lennon and Angela Mentis, their Annual VR deferred award will be paid as deferred cash.
(2) Susan Ferrier's VR for 2023 has been pro-rated for the period she was a KMP being 1 October 2022 to 17 August 2023.
(3) VR converted from NZD using the average exchange rate for the 2023 financial year. The Board approved VR for Daniel Huggins of $1,215,269 based on a spot exchange
rate of A$1 = NZ$1.0855.
(4) Sarah White received Annual VR in respect of her role prior to becoming a KMP. She was not awarded any Annual VR in relation to her Group Executive People and Culture
role in 2023.
4.4 Prior year long-term VR awards
(a) LTVR award testing
No LTVR was available for vesting in the current year.
(b) Overview of unvested long-term awards
The following is a summary of the unvested long-term awards held by the Group CEO and Group Executives.
Award
LTVR allocated in 2019
Grant
date
Performance period
Vesting
date
Performance measures
No LTVR awards were granted for the 2018
performance year
LTVR allocated in 2020(1) 26/02/2020
15/11/2019 to 15/11/2023
22/12/2023 NAB's TSR performance against a financial services
peer group
LTVR allocated in 2021(1) 24/02/2021
15/11/2020 to 15/11/2024
22/12/2024 NAB's TSR performance against a financial services
peer group
LTVR allocated in 2022(1) 23/02/2022
15/11/2021 to 15/11/2025
22/12/2025 NAB's TSR performance against a financial services
peer group
LTVR allocated in 2023(1) 23/02/2023
15/11/2022 to 15/11/2026
22/12/2026 NAB's TSR performance against a financial services
peer group
(1) The LTVR awards were granted based on individual performance, risk and conduct outcomes in the respective prior performance year.
The FY24 LTI award (comprised of the LTVR and LTEA components) will be granted in February 2024 under the new executive
remuneration framework.
132 National Australia Bank
Remuneration Report (cont.)
4.5 Realised remuneration
The table below is a voluntary non-statutory disclosure that shows the realised remuneration the Group CEO and each Group
Executive received during 2023. The amounts shown include fixed remuneration, and equity and cash-based awards that vested
in 2023. The table provides shareholders with enhanced transparency of remuneration received by Executives. The table is not
prepared in accordance with Australian Accounting Standards and this information differs from the statutory remuneration table
(in section 7).
2023
Prior years
Fixed
remuneration(1)
Annual
VR cash
Total 2023
remuneration
$
$
$
2,494,509
1,350,000
3,844,509
2,502,740
1,387,500
3,890,240
LTI
Performance
Rights
(2)
(3)
Other
vested/
paid
remuneration
(4)
(3)
Total
realised
remuneration
Equity
forfeited /
lapsed
(5)
(3)
$
-
-
-
$
$
432,063
4,276,572
-
3,890,240
421,622
1,848,090
$
-
-
-
966,371
939,001
460,097
1,426,468
441,372
1,380,373
557,019
13,790
1,951,182
(294,095)
1,219,188
435,881
1,655,069
1,174,850
416,250
1,591,100
1,376,319
329,598
1,705,917
902,116
418,142
1,320,258
1,220,965
691,875
1,912,840
-
-
-
-
-
121,496
1,776,565
-
1,591,100
118,051
1,823,968
16,198
1,336,456
234,448
2,147,288
-
-
-
-
-
1,202,821
641,151
1,843,972
905,143
-
2,749,115
(477,886)
972,004
902,116
532,508
1,504,512
418,142
1,320,258
1,220,937
719,550
1,940,487
1,202,822
669,027
1,871,849
1,681,268
583,481
2,264,749
-
-
-
-
-
1,102,587
562,169
1,664,756
994,641
196,018
1,700,530
4,667
1,324,925
1,060,691
3,001,178
767,561
520,867
15,918
2,639,410
2,785,616
2,675,316
(525,196)
-
-
-
-
-
1,068,057
532,744
1,600,801
1,052,469
487,832
1,540,301
1,834,347
608,850
2,443,197
-
-
-
113,708
1,714,509
-
1,540,301
1,225,383
3,668,580
-
-
-
1,205,315
692,367
1,897,682
1,193,581
44,380
3,135,643
(630,195)
1,220,937
664,200
1,885,137
1,202,822
585,399
1,788,221
1,526,171
795,656
2,321,827
-
-
-
577,998
2,463,135
15,785
1,804,006
2,099,910
4,421,737
-
-
-
1,503,527
696,903
2,200,430
1,293,065
81,400
3,574,895
(682,694)
1,141,636
608,240
1,749,876
1,124,003
580,127
1,704,130
105,814
-
105,814
-
-
-
187,776
696,728
1,937,652
2,400,858
-
105,814
-
-
-
Name
Group CEO
Ross McEwan
Group
Executives
Sharon Cook
Shaun Dooley
Susan Ferrier
David Gall
Nathan Goonan(6)
Andrew Irvine
Gary Lennon
Les Matheson
Angela Mentis
Rachel Slade
Patrick Wright
Daniel
Huggins(7)(8)
Sarah White(9)(10)
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
(1)
Includes cash salary, superannuation and payments on separation consistent with the statutory remuneration table in section 7.1, excluding accrued annual
leave entitlements.
(2) In 2018, no LTVR was awarded and available for vesting in the current year.
(3) The value of equity awards is calculated using NAB's closing share price on the vesting or forfeiture or lapsing date.
(4) Amounts related to other vested equity or cash-based remuneration from prior years. This includes VR deferred rights, commencement awards, shares received under
the General Employee Share Offer and dividends accumulated during the vesting period on VR vesting in the year. Details of the vested equity awards are provided in
section 7.
(5) Awards or remuneration lapsed or forfeited during 2023. Details of the awards are provided in section 7.
(6) Nathan Goonan was appointed Group Chief Financial Officer effective 1 July 2023. The figures disclosed reflect both his remuneration received as the former Group
Executive, Strategy & Innovation and in his current role.
(7) AUD/NZD exchange rate of 1.08447, being year to date average exchange rate as of September 2023.
(8) Daniel Huggins' remuneration includes VR paid during the year relating to the period before he was a KMP.
(9) Sarah White received Annual VR in respect of her role prior to becoming a KMP. She was not awarded any Annual VR in relation to her Group Executive People and Culture
role in 2023.
(10) Sarah White did not have any VR vest or paid during the period she was a KMP.
2023 Annual Report
133
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Remuneration Report (cont.)
Section 5 - Executive remuneration in 2024
5.1 Our new executive remuneration framework
As foreshadowed in our 2022 Remuneration Report, the Board undertook a detailed review of the remuneration framework for
the Group CEO and Group Executives in 2023. The review was in preparation for the implementation of APRA's Prudential Standard
CPS 511 Remuneration (CPS 511). Based on the review, the Board approved changes to the framework, which took effect from
1 October 2023. The changes meet the requirements of CPS 511 and ensure that the remuneration framework:
• maintains a strong focus on individual performance, conduct and management of financial and non-financial risks;
• drives short and long-term performance, sustainable shareholder growth and a focus on customer outcomes; and
• provides mechanisms to ensure remuneration outcomes will be commensurate with performance and risk outcomes.
Key changes in the executive remuneration framework
134 National Australia Bank
2023 Framework (CEO)2024 Framework (CEO)Annual VR assessmentAnnual VR assessmentLTVR test date with 100% able to vest subject to pre-vest individual performance, risk andconduct assessmentLTI performance measures tested. Pre-vest individual performance, risk and conduct assessment is undertaken for each participantOther ELT membersFor other ELT members, vested LTI (LTEA and LTVR) is exercised and Shares are acquired at the end of 2027 (50%) and 2028 (50%) ELT membersThis framework applied to all ELTmembers in 2023 (i.e., the GroupCEO and all Group Executives) 1/3 of vested LTI exercised and shares acquired at the end of year 4, 5 and 6 subject to continued service and pre-vest individual performance, risk and conduct assessmentPre-grant assessment against individual performance, risk and conductFixed remunerationFixed remunerationLong term incentiveLTVR performance rights assessed against relative TSR measure (100%) based on 8 FS peers, over 4 year performance periodCash VR (50%)(1)Cash VR (60%)(1)Deferred VR (12.5%)(2)Deferred VR (20%)(2)Deferred VR (12.5%)(2)Deferred VR (20%)(2)Deferred VR (12.5%)(2)Deferred VR (12.5%)(2)LTVR performance rights (50%; financial measure)LTEA performance rights (50%; non-financial measure)1/3 released per year for three years21/3 released per year for three years(2)20232024202520262027202420252026202720282029(1) Cash Annual VR is paid at the end of the financial year.(2) Deferred VR, LTEA performance rights and LTVR performance rights are released at the end of the year.Long Term Incentive AwardReduction in remunerationOverall longer VR deferral periodsNew relative TSR peer group• The new Long Term Incentive (LTI) Award is comprised of two equally weighted components of remuneration which togetherprovide material weight to financial and non-financial measures in compliance with APRA requirements. These two components are the LTEA and LTVR(1): • LTEA: Performance rights subject to a non-financial performance measure tested over a four year period. The measure tests whether NAB meets or exceeds risk expectations(2) and maintains anacceptable level of risk exposure within the agreed appetite levelsfor risks specific to the Group. • LTVR: Performance rights subject to a financial performance measure tested over a four year period(3) being TotalShareholder Return (TSR). TSR aligns remuneration with long term shareholder outcomes and growth. ↓Maximum Annual VR opportunity reduced from 150% of FR to 100%(4) ↑Long term reward (LTEA + LTVR) increased from 130% of FR to 140% ↓Maximum total remuneration opportunity reduced from 380% of FR to 340% ↓Remuneration delivered in cash reduced from 175% to 160% of FR as a result of the reduced maximum total remuneration opportunity ↑Proportion of total remuneration delivered in cash increases from 46% to 47% of maximum remuneration opportunityVR is more heavily weighted towards long-term components, encouraging long-term decision making and safe, sustainable, long-term growth.–2 years in the length of the Annual VR deferral period (from 50% deferred vesting over four years to 40% deferred vesting over two years)+2 years in the length of the LTI deferral period for the Group CEO (from four years to six years)(5)+1 year in the length of the LTI deferral period for Group Executives (from four years to five years)(5)The longer LTI deferral period aligns executives with the longer term shareholder experience and encourages a focus on delivering sustainable long-term value. The Annual VR deferral period has been shortened to balance the overall longer deferral period applied to the LTI.• The TSR peer group has been expanded to include twelve peer companies (previously eight). The expanded peer group provides a greater range of possible outcomesand reduces the sensitivity impact of a minor change in TSR(6). The TSRpeer group now includes:• AMP Limited• Australia and New Zealand Banking Group• Bank of Queensland Limited• Bendigo and Adelaide Bank Limited• Commonwealth Bank of Australia• Macquarie Group Limited• Suncorp Group Limited • Westpac Banking Corporation• Medibank Private Limited – new• NIB Holdings Limited – new• QBE Insurance Group – new• Insurance Australia Group – new(1)The LTI Award (LTEA and LTVR components) is granted at the start of the financial year subject to an individual pre-grant performance, risk and conduct assessment.(2)The performance measure for the LTEA component is assessed at the end of the four-year performance period.(3)No change has been made to the performance period of the LTVR component which will continue to be tested at the end of the four-year performance period.(4)The maximum Annual VR opportunity for the Group Chief Risk Officer is reduced from 112.5% of FR to 65%.(5) LTI participants will receive a cash amount equal to the value of dividends paid during the deferral period (including imputation credits applied to the dividends) in respect of each performance right that vests and is exercised. The dividend equivalents will be paid by NAB on or around the exercise date.(6)The new TSR peer group will apply to any LTVR component awarded after 1 October 2023 (FY24). Remuneration Report (cont.)
Maximum remuneration opportunity – CEO
The chart below illustrates the reduction in the maximum total remuneration opportunity of the CEO under the 2024 executive
remuneration framework. The reduction is driven by the decrease in Annual VR opportunity offset by an increase to the long-term
VR opportunity reinforcing the importance of decision making, strategic execution and safe, sustainable growth over the long-
term.
New risk management and conduct framework
The 2024 executive remuneration framework continues to focus executives on risk management through annual risk and
conduct assessments. These are undertaken as follows:
VR plan
Timing of risk management and conduct assessment:
Annual
VR
• At the end of the year when Annual VR outcomes are determined.
• At the end of each year during the deferral period before deferred rights are exercised and shares are allocated.
LTI
Risk management and conduct assessments are undertaken at four stages:
1. Pre-grant risk and conduct assessment: At the start of the performance year, an individual assessment of each
participant is undertaken to determine the value of performance rights (LTEA and LTVR components) to be awarded to
the participant.
2. Throughout the performance period: Risk and conduct assessments are undertaken throughout the four year
performance period.
3. Prior to vesting of performance rights: At the end of the four year performance period, the LTEA and LTVR performance
measures are tested and an individual risk and conduct pre-vest assessment is undertaken for each participant. This
pre-vest assessment will determine the value of the LTI award (LTEA and LTVR components) that will vest for each individual.
4. Before exercise of vested awards and acquisition of shares: At the end of each year during the deferral period before
vested performance rights are exercised and shares are allocated.
Further information about the risk and conduct assessment mechanisms and the approach to determining remuneration
adjustments is provided in section 6.3.
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2023 Annual Report
135
AVR (Equity)(cid:1145)(cid:1154)(cid:1148)(cid:1143)(cid:1143)(cid:1154)(cid:1143)(cid:1143)(cid:1143)(cid:1145)(cid:1154)(cid:1148)(cid:1143)(cid:1143)(cid:1154)(cid:1143)(cid:1143)(cid:1143)(cid:1146)(cid:1154)(cid:1145)(cid:1148)(cid:1143)(cid:1154)(cid:1143)(cid:1143)(cid:1143)(cid:1144)(cid:1154)(cid:1150)(cid:1148)(cid:1143)(cid:1154)(cid:1143)(cid:1143)(cid:1143)(cid:1144)(cid:1154)(cid:1151)(cid:1150)(cid:1148)(cid:1154)(cid:1143)(cid:1143)(cid:1143)(cid:1144)(cid:1154)(cid:1148)(cid:1143)(cid:1143)(cid:1154)(cid:1143)(cid:1143)(cid:1143)(cid:1144)(cid:1154)(cid:1151)(cid:1150)(cid:1148)(cid:1154)(cid:1143)(cid:1143)(cid:1143)(cid:1144)(cid:1154)(cid:1143)(cid:1143)(cid:1143)(cid:1154)(cid:1143)(cid:1143)(cid:1143)(cid:1144)(cid:1154)(cid:1150)(cid:1148)(cid:1143)(cid:1154)(cid:1143)(cid:1143)(cid:1143)2023 Framework (Max)Total 9,500,000 (cid:4)(cid:28)(cid:46)(cid:35)(cid:1)(cid:1103)(cid:1105)(cid:1758)(cid:1)(cid:1193)(cid:1)(cid:6)(cid:44)(cid:48)(cid:36)(cid:47)(cid:52)(cid:1)(cid:1104)(cid:1103)(cid:1758)Total 8,500,000 (cid:4)(cid:28)(cid:46)(cid:35)(cid:1)(cid:1103)(cid:1106)(cid:1758)(cid:1)(cid:1193)(cid:1)(cid:6)(cid:44)(cid:48)(cid:36)(cid:47)(cid:52)(cid:1)(cid:1104)(cid:1102)(cid:1758)2024 Framework (Max)LTEA (Equity)FR (Cash)AVR (Cash)LTVR (Equity)Pre-grant risk and conduct assessmentPerformance periodPre-vest risk and conduct assessmentExercise of vested performance rights and allocation of shares(1)End of 20232024 – 2027End of 20271. Pre-grant individual performance, risk management and conduct assessment2. Assessment of LTEA and LTVR performance measures3. Pre-vest individual performance, risk and conduct assessment4. Assessment of Individual performance, risk and conduct prior to allocation of sharesPerformance Criteria• Individual performance• Risk Management• Conduct (How We Work)Application Number of awards granted determined by the BoardOutcome Performance rights granted in February 2024 LTEARisk measureLTVRTotal Shareholder ReturnApplication Preliminary vesting outcome determined by the BoardPerformance Criteria• Individual performance• Risk Management• Conduct (How We Work)Board discretion to adjust outcomeApplication Vesting outcome determined by the BoardOutcome Performance rights vest Performance Criteria• Individual performance• Risk Management• Conduct (How We Work)Board discretion to adjust outcomeApplication Number of vested performance rights that can be exercised are modified by the Board where an event or matter justifies the adjustmentOutcome Performance rights are exercised and shares are allocated(1) Shares are allocated to the Group CEO in three equal tranches at the end of 2027, 2028 and 2029 (i.e., 33% per year). Shares are allocated to the Group Executives in two equal tranches at the end of 2027 and 2028 (i.e., 50% per year).End of 2027End of 2028End of 2029
Remuneration Report (cont.)
5.2 Executive remuneration in 2024
Feature
Description
Fixed Remuneration
2024 LTI award
(LTEA and
LTVR components)
As a result of the changes in the ELT in 2023 and 2024, the Board determined an increase in the FR for
Sharon Cook, Shaun Dooley and Les Matheson to reflect the increase in accountabilities(1) and, Nathan
Goonan and Daniel Huggins to reflect external pay relativity adjustments. The combination of the change
in composition of the Executive Leadership Team and FR increases resulted in FR for the Executive
Leadership Team decreasing by 15% for 2024. Total remuneration (at target) has decreased by 19% for
2024. This reflects the Board's focus on disciplined cost management and maintaining responsible levels of
executive remuneration.
No increase was made to the FR of the Group CEO for 2024.
The FR increase for the following three Group Executives is effective from 1 November 2023, reflecting the
changes to their portfolios.
•
•
•
Sharon Cook – Group Executive, Legal and Commercial Services: from $973,750 to $1,000,000
($26,250 increase)
Shaun Dooley – Group Chief Risk Officer: from $1,230,000 to $1,300,000 ($70,000 increase)
Les Matheson – Group Chief Operating Officer: from $1,076,250 to $1,150,000 ($73,750 increase)
The FR increase for the following two Group Executives is effective from 3 January 2024, aligning to when FR
increases apply for all other colleagues.
• Nathan Goonan – Group Chief Financial Officer: from $1,127,000 to $1,175,000 ($48,000 increase)
• Daniel Huggins – Managing Director and CEO of Bank of New Zealand: from $1,133,118 to $1,179,180
($46,062 increase)
The Board assessed the Group CEO and all Group Executives as having met the pre-grant individual
performance, risk management and conduct assessments. Accordingly, the Board determined that each
be awarded a 2024 LTI award, comprising the LTEA component and the LTVR component, each with a face
value of 70% of FR (i.e., a total value of 140% of FR). The LTI award (LTEA and LTVR components) will be granted
in February 2024.
The actual value delivered to the Group CEO and each Group Executive is subject to the level of
achievement against the relevant four-year performance measures and may be zero if the performance
measures are not achieved.
For the Group CEO, the 2024 LTI award comprising of the LTEA component (60,511 performance rights) and
LTVR component (60,511 performance rights) is proposed to be granted in February 2024 (based on NAB's
weighted average share price of $28.92 over the last five trading days of the 2023 financial year). The grant
of this award is subject to shareholder approval at NAB's 2023 AGM.
Further details about the 2024 LTI award (including the LTEA and LTVR components) is presented in
section 5.1.
Non-
executive directors
The Board undertakes a review of the quantum of Board fees annually in December. Based on the
review undertaken in 2022, the Board determined not to make any changes to Board fees in the 2023
financial year.
The Board will next review Board fees in December 2023. Any change to Board fees in 2024 will be reported
in the 2024 Remuneration Report.
(1) Les Matheson was appointed as the Group Executive Digital, Data and Chief Operating Officer following the retirement of Angela Mentis on 31 October 2023. The
responsibilities of Angela Mentis' role were distributed to Les Matheson (Group Executive Digital, Data and Chief Operating Officer). A small portion of Les Matheson's
Chief Operating Officer responsibilities were distributed between Shaun Dooley (Group Chief Risk Officer), Sharon Cook (Group Executive, Legal and Commercial
Services) and Sarah White (Group Executive, People and Culture). The FR increases for Les Matheson, Shaun Dooley and Sharon Cook recognise the increase in
their responsibilities.
136 National Australia Bank
Remuneration Report (cont.)
Section 6 - Governance, risk and consequence
6.1 Remuneration governance and oversight
6.2 Board discretion in relation to remuneration
The Board has absolute discretion to adjust the Rewards(1) of any employee down, or to zero, where appropriate, including in
circumstances where Group or individual performance outcomes have changed over time since the Reward was provided or for
an act or omission that has impacted performance outcomes. Adjustments include, but are not limited to:
• determining the initial value of Rewards and varying their terms and conditions, including the performance measures.
• determining that some, or all, of the unvested Rewards be forfeited or extending the deferral period at any time for any
Rewards including due to the conduct standards in the Code not being met or following the occurrence of a Malus Event(2).
• clawing back paid and vested Rewards (to the extent legally permissible).
People & Remuneration Committee
On behalf of the Board, the Committee's responsibilities include:
• monitoring the effectiveness of the Colleague strategy.
• developing and maintaining an effective Remuneration Policy and ensuring governance in its application.
• making recommendations to the Board in relation to the performance and remuneration outcomes for the Group CEO, Group
Executives and other persons determined by the Board and ensuring outcomes are responsible and consistent with the
Group's strategy and risk appetite.
• consideration of the findings of risk and conduct assessments for the Group CEO, Group Executives and other persons
determined by the Board and determination of consequences.
• oversight of the Group's people and remuneration strategies, frameworks, policies and practices to ensure compliance with
legal and regulatory requirements, market practice and trends and the expectations of customers and shareholders.
Further detail about the Committee is provided in our Corporate Governance Statement (on page 79) and in the People &
Remuneration Committee Charter which is available on nab.com.au.
(1)
In this section, the term 'Rewards' refers to all forms of variable reward including cash provided under a VR plan, deferred VR (cash and equity) to be paid or granted,
LTEA and LTVR performance rights and any VR granted in previous years.
(2) Examples include where the executive has failed to comply with their accountability obligations under the Banking Act 1959 (Cth); has engaged in fraud, dishonesty,
gross misconduct, behaviour that may negatively impact the Group's long-term financial soundness or prudential standing or behaviour that brings NAB into disrepute;
or has materially breached a representation, warranty, undertaking or obligation to the Group.
2023 Annual Report
137
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Executive Remuneration CommitteeMakes recommendations to the People & Remuneration Committee and the Board about the impact of risk, conduct, performance and other issues on variable remuneration outcomes for current or former employees (excluding the Group CEO and Group Executives). Membership is comprised of the:•Group Executive People and Culture•Group Chief Risk Officer•Group Executive Legal and CommercialPeople & Remuneration CommitteeAssists the Board to discharge its responsibilities relating to people and remuneration strategies, policies and practices of the Group.This remit focuses on long-term sustainable policy settings that foster desired culture while reinforcing compliance with NAB’s Code of Conduct and fulfilling regulatory requirements across jurisdictions in which the Group operates.Undertakes the risk and conduct assessments of the ELT in consultation with the Risk & Compliance Committee.Risk & Compliance Committee Audit Committee Customer Committee Nomination & Governance CommitteeProvide expert, independent reports and information as required.Present the “voice” of customers and incorporate the customer experience in performance and reward outcomes.Provide input to setting measures and targets and assessing performance. Refer any relevant matter which may impact performance and remuneration outcomes.Consulted by PRemCo on the risk and conduct assessments of the ELT.ShareholdersNAB BoardReviews and approves remuneration related recommendations from the People & Remuneration CommitteeExternalMay be engaged to independently review the Group’s remuneration framework, policy and practices to assist the People & Remuneration Committee and Board by providing relevant insights to inform decision making. Independent external advisors do not make any decisions on behalf of the People & Remuneration Committee or the Board.
Remuneration Report (cont.)
6.3 Conduct, risk and consequence management
The risk management and conduct framework was reviewed and updated in 2023 to reflect CPS 511 requirements. The review
resulted in:
• Creation of Risk Framework Guiding Principles which guide annual risk and conduct assessments and the application
of consequences.
• A new People & Remuneration Committee and Board Risk and Conduct Assessment Guide which provides steps and factors to
be considered when assessing the nature and type of risk or conduct matter and where required the adjustment criteria to
be applied to VR.
The Committee regularly reviews Group and individual outcomes for risk, reputation, conduct and performance considerations.
This includes oversight of the Group's Employee Conduct Management Framework (Framework) which supports an appropriate
risk culture across the Group. The Board, Group CEO and Group Executives influence culture by focusing on leadership behaviour,
systems and colleagues, reinforced through performance and remuneration outcomes.
How conduct and risk are integrated in our remuneration framework
138 National Australia Bank
Conduct managementRisk assessmentScope• Applies to all colleagues including the Group CEO and Group Executives• Colleagues are required to comply with the Code and Framework• Applies to all colleagues including the Group CEO and Group Executives• All colleagues (excluding the Group CEO) have a mandatory risk goal in their annual performance scorecard. The Group CEO has a risk modifier applied to his annual VR outcomeIndividual assessment• Throughout the year: Leaders assess the severity of any employee conduct and risk matters and determine the appropriate consequence depending on the severity of the matterConsequences may include any combination of coaching, counselling, formal warnings, termination of employment, impacts to in-year performance assessment, reduction to variable reward outcomes and the application of malus or clawback• Quarterly: Risk goals are discussed during quarterly performance check-ins. Conduct matters and risk issues are discussed as appropriate• At year end: Leaders undertake a holistic conduct history review and evaluate achievement of the risk goal. These are translated into the colleague’s performance rating. Remuneration decisions are informed by the performance ratingExecutive and Board oversight• In assessing conduct and consequence, each business and enabling unit maintains a Professional Standards Forum which makes recommendations to the Executive Remuneration Committee (members include the Group Executive People and Culture, Group Chief Risk Officer and the Group Executive Legal and Commercial Services)• The Executive Remuneration Committee oversees the effectiveness of the Framework, reviews material events, accountability and the application of suitable consequences• The People & Remuneration Committee and the Board oversee variable remuneration adjustments for the Group CEO and Group Executives, as well as certain colleagues in designated roles as required by CPS 511• Divisional Chief Risk Officers provide oversight, challenge and independent input into the performance review process• The Group Chief Risk Officer prepares a detailed assessment of the risk outcomes for the Group CEO and each of the Group Executives• The Risk & Compliance Committee reviews and challenges the Group Chief Risk Officer’s risk management performance assessments. These assessments and the Risk & Compliance Committee’s views are considered by the Board in determining individual variable reward outcomes for the Group CEO and Group Executives• The variable reward for Group CEO, Group Executives and employees variable reward will be reduced and other consequences may be applied if risk is not appropriately managedPotential impacts on remuneration• Risk adjustment: On recommendation from the People & Remuneration Committee, the Board may adjust the “in-year” funding level of VR outcomes. The Board may also reduce VR for individuals to align with employee conduct or risk outcomes• Malus: Grant and vesting of all VR is subject to the employee meeting the conduct standards outlined in the Code and risk expectations. The Board may determine that unvested awards should be adjusted or forfeited (including to zero) in circumstances where these conduct standards or risk expectations are not met• Clawback: Clawback may be applied to paid and vested VR provided to any colleague including the Group CEO and Group Executives Remuneration Report (cont.)
Risk, conduct and the consequence management framework
The Consequence Severity Matrix provides guidance to determine the severity of risk and conduct events. Based on the severity
of the risk or conduct event, a fair and proportionate consequence outcome will be applied. Determination of the appropriate
consequence is guided by an assessment of the quantitative and qualitative impacts of the event including financial impacts,
physical, informational or reputational damage to the organisation and harm to colleagues or customers.
The Group CEO and Group Executives actively demonstrate strong risk management to set the "tone from the top" about
expectations and behaviours. Risk issues that are identified are prioritised, clear accountability is defined, and an action plan
is created to resolve the issue. This has resulted in an improvement in conduct risk, driven by the increased use of analytical
monitoring tools and implementation of assurance capabilities. Enhancements in the use of risk monitoring tools has resulted in
improved identification of risk events and an increase in the number of risk cases investigated relative to 2022.
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2023 Annual Report
139
Context, motivation or intentActual or potential impact to customers, reputation or well-being of others Consequence Severity MatrixSerious Misconduct MinorMild(cid:202)(cid:390)(cid:370)(cid:433)(cid:390)(cid:572)(cid:328)(cid:271)(cid:433)(cid:503)IntentBehaviourIntentionalWilful, deliberate, deceitful, fraudulentDishonestCovers up, blames others, does not take accountabilityError in JudgementNegligentRepeated behaviour(cid:5)(cid:42)(cid:32)(cid:46)(cid:41)(cid:1165)(cid:47)(cid:1)(cid:39)(cid:32)(cid:28)(cid:45)(cid:41)(cid:1)(cid:33)(cid:45)(cid:42)(cid:40)(cid:1)mistakes or persists with misconduct despite warningsUnintentionalMistake, factors out of their control, took reasonable preventative stepsGrowth MindsetSpeaks up, shares (cid:39)(cid:32)(cid:28)(cid:45)(cid:41)(cid:36)(cid:41)(cid:34)(cid:1154)(cid:1)(cid:46)(cid:32)(cid:32)(cid:38)(cid:46)(cid:1)(cid:47)(cid:42)(cid:1)(cid:1970)(cid:51)(cid:1)(cid:47)(cid:42)(cid:1)prevent self or others making the same errorNatureNon-adherence to standard practicesBreach of policy, procedures, guidelines or employment contract Regulatory breach or breaking the lawImpactNo/Low impactModerate impact(cid:20)(cid:36)(cid:34)(cid:41)(cid:36)(cid:1970)(cid:30)(cid:28)(cid:41)(cid:47)(cid:1)(cid:28)(cid:41)(cid:31)(cid:1)material impactGainPersonal LossNo personal gainSelf-serving (cid:43)(cid:45)(cid:42)(cid:1970)(cid:47)(cid:32)(cid:31)
Remuneration Report (cont.)
Remuneration adjustments and consequence outcomes applied to employees (including the Group CEO and Group Executives)
during 2023 are provided in the table below.
Employees recognised for their positive contribution to risk culture
Employees identified as not having met risk expectations and accountabilities
Code of Conduct breaches identified that resulted in formal consequences
Employees leaving due to consequence outcomes
Employees receiving coaching, warnings or other remedial actions
Employees recommended to receive an in-year performance rating and / or variable reward reduction of 5%
to 100%
2023
6,353
2,535
6,186(1)
156
5,874
151
2022
6,036
2,737
5,788
166
5,453
168
Deferred VR forfeitures and in-year VR adjustments as a result of Code of Conduct breaches and revisiting
previous reward decisions
$1.19m(2)
$0.60m(3)
(1) Conduct outcomes are applied as conduct matters arise throughout the year. During the end of year performance and remuneration review process, governance
checks and controls are applied to determine final performance and reward outcomes. Total number of cases may vary due to attrition.
(2) This is an indicative figure as the full performance and reward review cycle has not concluded. The final figure will be reflected in the 2024 Remuneration Report. For
2023, deferred VR forfeitures includes equity and cash.
(3) For 2022 this includes the value pertaining to in-year adjustments to VR as well as employees who left the organisation due to consequence outcomes (including on a
voluntary basis).
140 National Australia Bank
Remuneration Report (cont.)
Section 7 - Group CEO and Group Executive statutory remuneration disclosures
7.1 Group CEO and Group Executive statutory remuneration
The following table has been prepared in accordance with Australian Accounting Standards and section 300A of the Corporations Act 2001 (Cth). The table shows details of the nature and
amount of each element of remuneration paid or awarded to the Group CEO and Group Executives for services provided during the year while they were KMP (including variable reward
amounts in respect of performance during the year which are paid following the end of the year).
Short-term benefits
Annual VR
Post-
employment
benefits
Equity-based benefits
Other long-
term
Cash salary(1)
cash(2)
Non-monetary(3) Superannuation(4)
benefits(5)
Shares(6)
Rights(7)
Other
remuneration
$
$
2,383,654
1,350,000
2,450,563
1,387,500
941,248
882,372
1,194,244
1,123,618
759,132
833,168
1,176,909
1,151,208
860,389
808,894
1,139,383
1,146,875
1,128,646
1,062,018
1,022,367
1,012,014
1,224,399
1,163,359
460,097
441,372
435,881
416,250
329,598
418,142
691,875
641,151
532,508
418,142
719,550
669,027
583,481
562,169
532,744
487,832
608,850
692,367
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
$
626
-
-
585
-
585
3,972
585
2,257
2,842
415
585
50,000
117,079
1,267
585
9,488
585
16,562
13,977
$
$
24,554
23,410
25,123
23,685
24,944
23,616
25,160
23,685
29,903
28,495
25,160
23,685
24,940
23,581
25,014
23,616
25,050
23,633
24,940
23,461
20,463
17,170
10,315
8,886
41,735
40,042
6,661
6,209
18,880
19,370
17,423
14,776
8,651
6,800
17,372
17,823
7,570
5,950
18,607
19,103
$
-
-
6,691
53,093
-
-
107,481
109,365
-
-
2,164
17,211
259,642
496,345
7,724
61,286
-
-
21,065
167,181
$
2,396,795
2,392,323
913,654
680,593
1,022,839
1,012,079
567,918
783,776
1,303,310
946,763
932,098
815,077
1,270,779
1,221,057
858,372
748,848
1,030,559
967,032
1,060,696
938,526
$
-
-
-
-
-
-
566,986
-
-
-
-
-
-
-
562,205
-
-
-
613,315
-
(8)
Total
(9)
$
6,176,092
6,270,966
2,357,128
2,090,586
2,719,643
2,616,190
2,366,908
2,174,930
3,223,134
2,789,829
2,370,157
2,098,370
3,472,945
3,680,764
3,184,081
2,476,345
2,627,778
2,497,046
3,588,434
3,017,974
Name
Group CEO
Ross McEwan
Group Executives
Sharon Cook
Shaun Dooley
Susan Ferrier(10)
David Gall
Nathan Goonan(11)
Andrew Irvine(12)
Gary Lennon(13)
Les Matheson
Angela Mentis(14)
2023 Annual Report
141
Remuneration Report (cont.)
Short-term benefits
Annual VR
Post-
employment
benefits
Equity-based benefits
Other long-
term
Cash salary(1)
cash(2)
Non-monetary(3) Superannuation(4)
benefits(5)
Shares(6)
Rights(7)
Other
remuneration
Name
Rachel Slade
Patrick Wright
Daniel Huggins
Sarah White(15)
Total
Total
2023
2022
2023
2022
2023
2022
2023
2023
2022
$
1,162,972
1,160,503
1,495,553
1,555,186
997,754
1,050,508
110,342
$
664,200
585,399
795,656
696,903
608,240
580,127
-
15,596,992
8,312,680
15,400,286
7,996,381
$
415
585
84,477
134,929
1,461
-
-
170,940
272,922
$
24,940
23,581
24,721
23,476
100,259
94,514
-
404,708
382,438
$
14,748
12,832
16,287
14,030
-
-
1,750
200,462
182,991
$
7,659
60,774
39,497
313,399
19,484
198,570
17,819
489,226
1,477,224
$
1,246,085
1,213,405
1,567,781
1,082,488
757,763
631,168
26,705
$
-
-
-
-
-
-
-
(8)
Total
(9)
$
3,121,019
3,057,079
4,023,972
3,820,411
2,484,961
2,554,887
156,616
14,955,354
1,742,506
41,872,868
13,433,135
-
39,145,377
Includes cash allowances, payroll remediation payments, motor vehicle benefits and short-term compensated absences, such as annual leave entitlements accrued. Any related fringe benefits tax is included.
(1)
(2) The VR cash received in respect of 2023 is scheduled to be paid on 22 November 2023 in Australia and New Zealand.
(3) Includes relocation costs considered to provide a benefit to the individual (including temporary accommodation, furniture rental, utility costs, dependant travel costs, insurance, stamp duty, associated fringe benefit tax and other benefits). For
international assignees this may also include the provision of health fund benefits and tax advisory services.
(4) Includes company contributions to superannuation and allocations by employees made by way of salary sacrifice of post-tax fixed remuneration. Superannuation contributions are not required to be paid to individuals based in New Zealand, but such
payments may be made as part of cash salary.
(5) Includes long service leave entitlements accrued based on an actuarial calculation.
(6) 2023 expense based on the grant date fair value, amortised on a straight line basis over the vesting period for:
(a) Recognition shares granted to Susan Ferrier in February 2021, restricted until December 2023. The shares are subject to malus and clawback provisions.
(b) Commencement shares granted to Andrew Irvine in November 2020. 21% of the shares were restricted until December 2020, 21% until December 2021, 24% until December 2022, 31% until December 2023 and 3% in December 2024. The shares are
subject to continued employment, malus and clawback provisions.
(c) 2018 VR deferred shares granted in February 2019 to Sharon Cook, Gary Lennon, Angela Mentis, Rachel Slade and Patrick Wright. The shares are restricted for approximately four years, subject to performance and service conditions. 2019 VR
deferred shares granted in February 2020 to Nathan Goonan and Sarah White for performance in their previous roles. The shares are restricted for approximately three years, subject to performance and service conditions. 2020 and 2021 VR deferred
shares granted in February 2021 and February 2022 respectively to Sarah White for performance in her previous role, restricted until November 2023 (2020 VR) and November 2024 (2021 VR). 2021 VR deferred shares granted in February 2022 to Daniel
Huggins for performance in his previous role, restricted until November 2022. 2023 VR deferred shares to be granted in February 2024 to Sarah White for performance in her previous role, restricted until November 2026.
(d) 2022 Annual Equity Award granted in November 2022 to Sarah White for performance in her previous role, vesting across 3 years.
(7) 2023 expense based on the grant date fair value, amortised on a straight line basis over the vesting period for:
(a) 2023 VR deferred rights scheduled to be granted in February 2024. The VR deferred rights are restricted for up to four years, with 25% scheduled to vest in November 2024, 25% in November 2025, 25% in November 2026 and 25% in November 2027. The
deferred rights are subject to continued employment, malus and clawback.
(b) 2022 VR deferred rights granted in February 2023. The VR deferred rights are restricted for up to four years, with 25% scheduled to vest in November 2023, 25% in November 2024, 25% in November 2025 and 25% in November 2026. The deferred rights
are subject to continued employment, malus and clawback.
(c) 2021 VR deferred rights granted in February 2022, with 25% vested in November 2022, 25% scheduled to vest in November 2023, 25% in November 2024 and 25% in November 2025. The deferred rights are subject to continued employment, malus
and clawback.
(d) LTVR performance rights granted in February 2020, February 2021, February 2022 and February 2023 respectively.
(e) LTVR and LTEA performance rights scheduled to be granted in February 2024 as a part of the new ELT Remuneration Framework for 2024.
(f) The increase for 2023 is due to expensing of new performance rights allocated in respect of the 2023 financial year, in addition to continued expensing of existing performance rights not yet vested.
(8) The percentage of 2023 total remuneration which was performance-based was: Ross McEwan 60%, Sharon Cook 56%, Shaun Dooley 55%, Susan Ferrier 60%, David Gall 57%, Nathan Goonan 60%, Andrew Irvine 65%, Gary Lennon 55%, Les Matheson 58%, Angela
Mentis 60%, Rachel Slade 61%, Daniel Huggins 55%, Patrick Wright 55%.
(9) In addition to the remuneration benefits below, NAB paid an insurance premium for a contract insuring the Group CEO and Group Executives as officers. It is not possible to allocate the benefit of this premium between individuals. In accordance with
usual commercial practice, the insurance contract prohibits disclosure of details of the premium paid.
(10) On her retirement on 31 October 2023, Susan Ferrier received a $566,986 payment in respect of statutory entitlements, support for transition to retirement and in recognition of her contribution to the Group. Ms Ferrier retained her 2021 deferred VR
rights, 2021 recognition shares, 2022 deferred VR rights and her LTVR rights granted in 2021-2023. The value of the retained equity has been fully accounted for on retirement. That equity remains subject to the relevant performance measures and
restriction periods.
142 National Australia Bank
Remuneration Report (cont.)
(11) Nathan Goonan was appointed as the Group Chief Financial Officer effective 1 July 2023. The figures disclosed reflect both his remuneration received as the former Group Executive, Strategy & Innovation and in his current role.
(12) Non-monetary benefit received as Andrew Irvine's 2023 relocation entitlement on 12 October 2022.
(13) On his retirement on 1 October 2023, Gary Lennon received a $562,205 payment in respect of statutory entitlements and in recognition of his contribution to the Group. Mr Lennon retained his 2021 deferred VR rights, 2022 deferred VR rights and his
LTVR rights granted in 2020-2023. The value of the retained equity has been fully accounted for on retirement. That equity remains subject to the relevant performance measures and restriction periods.
(14) On her retirement on 31 October 2023, Angela Mentis received a $613,315 payment in respect of statutory entitlements and in recognition of her contribution to the Group. Ms Mentis retained her 2021 deferred VR rights, 2022 deferred VR rights and her
LTVR rights granted in 2020-2023. The value of the retained equity has been fully accounted for on retirement. That equity remains subject to the relevant performance measures and restriction periods.
(15) Sarah White did not participate in the Annual VR from 18 August 2023 to 30 September 2023 when she was appointed Group Executive People and Culture and did not receive an Annual VR award in respect of this period.
2023 Annual Report
143
Remuneration Report (cont.)
7.2 Value of shares and rights
The following table shows the number and value of shares and rights that were granted by NAB and held by the Group CEO and
each Group Executive under NAB's employee equity plans during the year to 30 September 2023. Rights refers to VR deferred
rights, LTVR performance rights and any other deferred rights or performance rights provided under a current or previous VR
plan. A right is a right to receive one NAB share subject to the satisfaction of the relevant performance and service conditions.
The grant value shown is the full accounting value to be expensed over the vesting period, which is generally longer than the
current year. The Group CEO and Group Executives did not pay any amounts for rights that vested and were exercised during
2023. There are no amounts unpaid on any of the shares exercised.
There have been no changes to the terms and conditions of these awards, or any other awards since the awards were granted.
All rights that vest are automatically exercised when they vest. For the awards allocated during the year to 30 September 2023,
the maximum number of shares or rights that may vest is shown for the Group CEO and each Group Executive. The maximum value
of the equity awards is the number of shares or rights subject to NAB’s share price at the time of vesting. The minimum number of
shares or rights and the value of the equity awards is zero if the equity is fully forfeited or lapsed.
Total
Granted(1)
Grant date
Granted
Name
Group CEO
No.
Ross McEwan
LTVR rights
180,655
24-02-2021
Deferred VR rights
54,806
23-02-2022
LTVR rights
118,010
23-02-2022
$
-
-
-
Deferred VR rights
47,664
23-02-2023
1,387,499
LTVR rights
111,645
23-02-2023
1,300,664
Group
Executives
Sharon Cook
Deferred VR shares
9,850
27-02-2019
Forfeited /
lapsed
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2023
Forfeited /
lapsed(2) Vested(3) Vested(4)
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
No
-
$
-
13,702
417,774
-
-
-
-
-
-
9,850
300,327
-
-
-
-
3,603
109,855
-
-
-
-
-
-
-
-
-
-
3,853
117,478
-
-
-
-
-
-
-
-
-
-
3,153
96,135
-
-
-
-
-
-
-
-
-
-
7,435
226,693
-
-
-
-
-
-
-
-
-
-
-
26-02-2020
24-02-2021
23-02-2022
23-02-2022
23-02-2023
441,366
23-02-2023
506,600
26-02-2020
24-02-2021
23-02-2022
23-02-2022
-
-
-
-
23-02-2023
416,244
23-02-2023
639,923
24-02-2021
24-02-2021
23-02-2022
23-02-2022
-
-
-
-
23-02-2023
418,136
23-02-2023
479,945
26-2-2020
24-2-2021
23-2-2022
23-02-2022
-
-
-
-
23-02-2023
641,148
23-02-2023
639,923
30,150
65,036
14,411
42,483
15,162
43,485
33,500
72,262
15,412
51,924
14,299
54,929
11,570
65,036
12,610
42,483
14,364
41,197
52,261
86,714
29,738
56,644
22,025
54,929
LTVR Rights
LTVR Rights
Deferred VR rights
LTVR Rights
Deferred VR rights
LTVR rights
Shaun Dooley
LTVR rights
LTVR rights
Deferred VR rights
LTVR rights
Deferred VR rights
LTVR rights
Susan Ferrier
Recognition shares
David Gall
LTVR rights
Deferred VR rights
LTVR rights
Deferred VR rights
LTVR rights
LTVR rights
LTVR rights
Deferred VR rights
LTVR rights
Deferred VR rights
LTVR rights
144 National Australia Bank
Remuneration Report (cont.)
Total
Granted(1)
Grant date
Granted
Forfeited /
lapsed
2023
Forfeited /
lapsed(2) Vested(3) Vested(4)
Name
Nathan Goonan
General employee shares
No.
39
11-12-2019
Deferred VR shares
2,604
26-02-2020
LTVR rights
Deferred VR rights
LTVR rights
Deferred VR rights
LTVR rights
Andrew Irvine
Commencement shares
LTVR rights
Deferred VR rights
LTVR rights
Deferred VR rights
LTVR rights
Gary Lennon
Deferred VR shares
LTVR Rights
LTVR Rights
Deferred VR rights
LTVR Rights
Deferred VR rights
LTVR rights
Les Matheson
LTVR rights
Deferred VR rights
LTVR rights
Deferred VR rights
LTVR rights
Angela Mentis
Deferred VR shares
LTVR Rights
LTVR Rights
Deferred VR rights
LTVR rights
Deferred VR rights
LTVR rights
Rachel Slade
Deferred VR shares
LTVR rights
LTVR rights
Deferred VR rights
LTVR rights
Deferred VR rights
LTVR rights
Patrick Wright
Deferred VR shares
LTVR Rights
LTVR Rights
Deferred VR rights
LTVR rights
Deferred VR rights
LTVR rights
24-02-2021
23-02-2022
23-02-2022
23-02-2023
418,136
23-02-2023
479,945
6-11-2020
24-02-2021
23-02-2022
23-02-2022
-
-
-
-
23-02-2023
669,006
23-02-2023
639,923
27-02-2019
26-02-2020
24-02-2021
23-02-2022
23-02-2022
-
-
-
-
-
23-02-2023
562,143
23-02-2023
586,601
24-02-2021
23-02-2022
23-02-2022
-
-
-
23-02-2023
487,825
23-02-2023
559,934
27-02-2019
26-02-2020
24-02-2021
23-02-2022
23-02-2022
-
-
-
-
-
23-02-2023
557,515
23-02-2023
639,923
27-02-2019
26-02-2020
24-02-2021
23-02-2022
23-02-2022
-
-
-
-
-
23-02-2023
585,373
23-02-2023
639,923
$
-
-
-
-
-
-
-
-
-
-
65,036
14,411
42,483
14,364
41,197
63,367
86,714
28,594
56,644
22,982
54,929
11,370
47,906
79,488
20,969
51,924
19,311
50,352
75,875
14,422
49,564
16,758
48,063
31,009
52,261
86,714
32,437
56,644
19,152
54,929
11,275
39,195
86,714
28,594
56,644
20,109
54,929
58,143
65,326
35,743
70,806
23,940
68,661
108,393
24-02-2021
27-02-2019
26-02-2020
23-02-2022
23-02-2022
23-02-2023
696,893
23-02-2023
799,901
No.
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
No
39
$
979
2,604
79,396
-
-
3,603
109,855
-
-
-
-
-
-
25,773
774,736
-
-
7,149
217,973
-
-
-
-
-
-
11,370
346,671
-
-
-
-
5,243
159,859
-
-
-
-
-
-
-
-
3,606
109,947
-
-
-
-
-
-
31,009
945,464
-
-
-
-
8,110
247,274
-
-
-
-
-
-
11,275
343,775
-
-
-
-
7,149
217,973
-
-
-
-
-
-
58,143
1,772,780
-
-
-
-
8,936
272,459
-
-
-
-
-
-
2023 Annual Report
145
i
t
h
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r
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p
o
r
t
A
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i
n
2
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2
3
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u
s
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s
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a
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m
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G
o
v
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r
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a
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g
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m
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i
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k
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D
i
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f
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n
a
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A
d
d
i
t
i
o
n
a
l
Remuneration Report (cont.)
Name
Daniel Huggins
LTVR rights
Deferred VR shares
Deferred VR rights
LTVR rights
Total
Granted(1)
Grant date
Granted
No.
54,019
23-02-2022
6,005
23-02-2022
$
-
-
18,997
48,340
23-02-2023
553,003
23-02-2023
563,161
Sarah White
General employee shares
39
11-12-2019
Deferred VR shares
1,853
26-02-2020
General employee shares
43
9-12-2020
Deferred VR shares
Deferred VR shares
Deferred VR shares
Deferred VR shares
1,442
3,956
1,950
3,948
24-02-2021
23-02-2022
10-11-2022
60,450
23-02-2023
117,492
Forfeited /
lapsed
No.
-
-
-
-
-
-
-
-
-
-
-
2023
Forfeited /
lapsed(2) Vested(3) Vested(4)
$
-
-
-
-
-
-
-
-
-
-
-
No
-
$
-
6,005
183,092
-
-
39
-
-
979
1,853
56,498
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) The following securities have been granted during 2023:
a) LTVR performance rights allocated in February 2023 (in respect of 2022) to the Group CEO and all Group Executives at the time of allocation. The performance rights
are restricted until December 2026 and subject to service and performance measures.
b) Deferred VR rights allocated in February 2023 (in respect of 2022) to the Group CEO and all Group Executives at the time of allocation. The rights vest annually in four
equal tranches between November 2023 and November 2026.
c) Deferred VR shares allocated in November 2022 and February 2023 (in respect of 2022) to Sarah White for her role prior to becoming a KMP.
(2) Calculated using NAB's closing share price on the forfeiture / lapsing date.
(3) The following securities have vested during 2023:
a) Deferred VR rights allocated in February 2022 partially vested in November 2022 for all ELT.
b) Deferred VR shares allocated in February 2019 vested in December 2022 for Sharon Cook, Gary Lennon, Angela Mentis, Rachael Slade and Patrick Wright.
c) Deferred VR shares allocated in February 2020 vested in December 2022 for Nathan Goonan and Sarah White.
d) Commencement shares allocated in November 2020 vested in December 2022 for Andrew Irvine.
e) General employee shares granted to Sarah White and Nathan Goonan in December 2019, fully vested in December 2022.
f) Deferred VR shares allocation in February 2022 vested in November 2022 for Daniel Huggins.
(4) Calculated using NAB's closing share price on the vesting date.
7.3 Determining the value of equity remuneration
The number of shares and rights provided to the Group CEO and Group Executives by NAB are determined using a face value
methodology. The table below shows the fair value of shares and rights granted by NAB during 2023 in accordance with statutory
requirements. The grant date fair value of each share is determined by the market value of NAB shares and is generally a five day
weighted average share price. The grant date fair value of shares and rights with market performance measures is determined
using a simulated version of the Black-Scholes model.
No performance options have been granted during the year. Shares and rights granted during 2023 were granted at no cost to
the Group CEO or Group Executive and have a zero exercise price.
Type of allocation
Deferred VR(3)
Deferred VR(4)
Award type
Grant date
Grant
share
price(1)
$
Performance rights
23 February 2023
29.76
Shares
23 February 2023
Long-Term Variable Reward(5)
Performance rights
23 February 2023
29.76
Fair
value
$
29.11
30.60
11.65
Restriction period end(2)
15 November 2023 -
15 November 2026
15 November 2025
22 December 2026
(1) The Grant share price is NAB's closing share price at the date of valuation (being the grant date of the relevant award). The Grant share price was used to determine the
fair value for the LTVR performance rights.
(2) Any performance rights that vest are automatically exercised at the end of the restriction period. The end of the restriction period for the performance rights is also
the expiry date for those performance rights.
(3) The number of deferred rights allocated to each eligible participant was calculated using the weighted average share price over the five trading days up to
30 September 2022, inclusive. The deferred rights are split across four equal tranches vesting on 15 November in 2023, 2024, 2025 and 2026.
(4) Deferred shares provided to Sarah White relating to the period prior to becoming a KMP.
(5) The number of LTVR performance rights allocated to each eligible participant was calculated using the weighted average share price over the five trading days up to
30 September 2022, inclusive.
146 National Australia Bank
Remuneration Report (cont.)
Hedging policy
Directors and employees are prohibited from protecting the value of their equity awards by hedging. Further details are available
in the Group Securities Trading Policy.
NAB’s Group Securities Trading Policy explains the law and the Policy our colleagues must comply with when trading in NAB
securities. All employees are prohibited from using derivatives in relation to elements of their remuneration that are unvested. In
addition, closely related parties of KMP are prohibited from using derivatives or otherwise entering into hedging arrangements in
relation to elements of their remuneration that are unvested or which have vested but remain subject to forfeiture conditions.
The Group Securities Trading Policy is available at nab.com.au/content/dam/nabrwd/documents/policy/corporate/group-
securities-trading-policy.pdf.
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2023 Annual Report
147
Remuneration Report (cont.)
7.4 Rights holdings
Rights were granted to the Group CEO and Group Executives in 2023 under the Annual VR and LTVR plans. No rights or performance
options (i.e. entitlements to NAB shares) are granted to the Group CEO or Group Executives' related parties.
No performance options (i.e. a right requiring payment of a subscription price on vesting) are currently held by the Group CEO or
Group Executives. The number of rights that vested during the year was equivalent to the number of rights that were exercised
during the year. As at 30 September 2023, no rights held by the Group CEO or Group Executives were: (i) vested and exercisable;
nor (ii) vested but not exercisable.
Name
Group CEO
Ross McEwan
Group Executives
Sharon Cook
Shaun Dooley
Susan Ferrier
David Gall
Nathan Goonan
Andrew Irvine
Gary Lennon
Les Matheson
Angela Mentis
Rachel Slade
Patrick Wright
Daniel Huggins
Sarah White
Balance at
beginning of
year(1)
Granted
during year
as
remuneration
Exercised
during year
Forfeited /
lapsed or expired
during year
Balance at
end of year
No.
No.
No.
No.
No.
353,471
159,309
(13,702)
152,080
173,098
120,129
225,357
121,930
171,952
200,287
139,861
228,056
211,147
280,268
54,019
-
58,647
69,228
55,561
76,954
55,561
77,911
69,663
64,821
74,081
75,038
92,601
67,337
-
(3,603)
(3,853)
(3,153)
(7,435)
(3,603)
(7,149)
(5,243)
(3,606)
(8,110)
(7,149)
(8,936)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
499,078
207,124
238,473
172,537
294,876
173,888
242,714
264,707
201,076
294,027
279,036
363,933
121,356
-
(1) Balance may include rights granted prior to individuals becoming KMP. For individuals who became KMP during 2023, the balance is at the date they became KMP.
148 National Australia Bank
Remuneration Report (cont.)
7.5 Group CEO and Group Executives' share ownership
The number of NAB shares held (directly and nominally) by the Group CEO and each Group Executive or their related parties (their
close family members or any entity they, or their close family members, control, jointly control or significantly influence) are set
out below:
Name
Group CEO
Ross McEwan
Group
Executives
Sharon Cook
Shaun Dooley
Susan Ferrier
David Gall
Nathan Goonan
Andrew Irvine
Gary Lennon
Les Matheson
Angela Mentis
Rachel Slade
Patrick Wright
Daniel Huggins
Sarah White
Balance at
beginning
of year(1)
Granted
during year
as
remuneration
No.
No.
53,897
33,424
71,104
11,570
119,848
3,590
86,371
136,913
-
196,304
48,435
125,141
6,005
11,992
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Received during
year on exercise
of rights
Other
changes
during year
Balance at end
of year(2)
No.
13,702
3,603
3,853
3,153
7,435
3,603
7,149
5,243
3,606
8,110
7,149
8,936
-
-
No.
-
(25,177)
-
(3,153)
(7,335)
-
(55,926)
(11,370)
-
-
-
(57,077)
(6,005)
-
No.
67,599
11,850
74,957
11,570
119,948
7,193
37,594
130,786
3,606
204,414
55,584
77,000
-
11,992
(1) Balance may include shares held prior to individuals becoming KMP. For individuals who became KMP during 2023, the balance is at the date they became KMP.
(2) NAB maintains a minimum shareholding policy. Holdings included in meeting the minimum shareholding requirement are NAB shares, unvested deferred shares and
deferred rights not subject to further performance conditions held by the executive and shares held by a closely related party or self-managed superannuation
fund for the benefit of the executive. Refer to section 7.6 for further details. The Group CEO and Executives have all met or are on track to meet the minimum
shareholding requirement.
7.6 Group CEO and Group Executive contract terms
The Group CEO and Group Executives are employed on the following contractual terms:
Contractual term
Arrangement
Duration
Notice period(1)
Other key
arrangements
on separation
•
•
•
•
Permanent ongoing employment
26 weeks(2)
If the Group CEO or Group Executive resigns they do not receive any annual or long-term variable reward in
that year and any unvested awards are forfeited.
If the Group CEO or Group Executive ceases employment for any reason other than resignation (for
example, retrenchment or retirement), they will retain all of their unvested awards unless the Board
exercises its discretion to determine a different treatment.(3)
• All statutory entitlements are paid.
Change of Control
•
If a change of control occurs, the Board has discretion to determine the treatment of unvested shares
and rights. Vesting of shares and rights will not be automatic or accelerated and the Board will retain
discretion in relation to the vesting outcome including absolute discretion to forfeit all shares and rights.
Post-employment
obligations
Minimum
shareholding policy
• Non-compete and non-solicitation obligations apply.
•
•
The Group CEO is required to hold NAB shares to the value of two times FR and Group Executives are
required to hold NAB shares equal to their individual FR.
The Group CEO and Group Executives are required to satisfy the minimum shareholding requirement within
a five-year period from the date of commencement in their role.
• Holdings included in meeting the minimum shareholding requirement are NAB shares, unvested deferred
shares and deferred rights not subject to further performance conditions held by the executive
and shares held by a closely related party or self-managed superannuation fund for the benefit of
the executive.
(1) Payment in lieu of notice for some or all of the notice period may be approved by the Board in certain circumstances. Termination payments are not paid on
resignation, summary termination or termination for unsatisfactory performance, although the Board may determine exceptions to this.
(2) Subject to the terms of the Group policy on resignation.
(3) Any unvested awards retained will be held by the Group CEO or Group Executive on the same terms. Unvested LTI awards retained (including the LTEA and LTVR
components) will remain subject to the performance measure, with that measure tested in accordance with the normal timetable.
2023 Annual Report
149
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Remuneration Report (cont.)
Section 8 - Non-executive director remuneration
8.1 Fee policy and pool
Non-executive directors receive fees to recognise their contribution to the work of the Board. Additional fees are paid, where
applicable, for serving on Board Committees, on Boards of controlled entities and internal advisory boards. Fees include NAB’s
compulsory contributions to superannuation. Fees are set to reflect the time commitment and responsibilities of the role.
To maintain independence and objectivity, non-executive directors do not receive any performance related remuneration.
Non-executive directors do not receive any termination payments.
The total amount of non-executive directors' remuneration is capped at a maximum aggregate fee pool that is approved by
shareholders. The current aggregate fee pool of $4.5 million per annum was approved by shareholders at NAB's 2008 AGM.
The total Board and Committee fees, including superannuation, paid to non-executive directors in 2023 is within the approved
aggregate fee pool.
The following table shows the 2023 non-executive director Board and Committee fee policy structure.
Board
Audit Committee
Risk & Compliance Committee
People & Remuneration Committee
Customer Committee
Nomination & Governance Committee
Chair ($pa)
825,000
65,000
65,000
55,000
40,000
-
Non-executive
director ($pa)
240,000
32,500
32,500
27,500
20,000
10,000
8.2 Minimum shareholding policy
To align with shareholder interests, the Board has adopted a policy that within five years of appointment, non-executive
directors must hold ordinary shares equal in value of the annual Chair fee for the Chair and base fee for all other non-
executive directors.
The value of a non-executive director's shareholding is based on the total amount spent to purchase the shares (using the share
price at the time the shares were acquired). Accordingly, the share price at the time of purchase will impact the number of
shares a non-executive director must own to meet the minimum shareholding requirement.
All non-executive directors who have been on the Board for the full year have met their minimum shareholding requirements in
full. Directors appointed during 2023 (Christine Fellowes, Carolyn Kay and Alison Kitchen) will be required to meet the minimum
shareholding requirements by 2028.
150 National Australia Bank
Remuneration Report (cont.)
8.3 Statutory remuneration
The fees paid to the non-executive directors are set out in the table below.
Name
Non-executive directors
Philip Chronican (Chair)
David Armstrong
Kathryn Fagg(4)
Peeyush Gupta(5)
(6)
Anne Loveridge
Douglas McKay(7)
Simon McKeon
Ann Sherry
Alison Kitchen (for part year)(8)
Carolyn Kay (for part year)(9)
Christine Fellowes (for part year)(10)
Total
Short-term benefits
Post-
employment
benefits
Cash salary
and fees(1)
$
799,181
801,001
337,500
313,501
276,319
281,001
277,043
329,543
318,677
325,000
557,145
545,444
289,181
308,677
281,681
283,501
2,923
41,890
82,007
Non-monetary(2)
Superannuation(3)
$
415
-
-
-
-
-
-
-
415
-
415
-
-
-
415
-
-
-
-
$
25,819
23,999
-
23,999
25,819
23,999
25,819
23,999
6,323
-
25,819
23,999
25,819
6,323
25,819
23,999
321
3,998
8,500
Total
$
825,415
825,000
337,500
337,500
302,138
305,000
302,862
353,542
325,415
325,000
583,379
569,443
315,000
315,000
307,915
307,500
3,244
45,888
90,507
3,263,547
3,187,668
1,660
-
174,056
150,317
3,439,263
3,337,985
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2023
2023
2023
2022
(1) The portion of fees in connection with their roles, duties and responsibilities as a non-executive director, and includes attendance at meetings of the Board, Board
committees and boards of controlled entities, received as cash.
(2) Relates to incidental tourism costs incurred beyond work related travel that is considered to provide a benefit to the individual.
(3) Reflects compulsory company contributions to superannuation. David Armstrong and Anne Loveridge elected to receive all or part of their payments in fees and
therefore received reduced or nil superannuation contributions during this period.
(4) Katherine Fagg's fees reflect her membership on the Board Audit Committee until 6 March 2023 and her membership on the People & Remuneration Committee
commencing on the same date until the end of the financial year.
(5) Peeyush Gupta's fees reflect his membership on the People & Remuneration Committee until 6 March 2023 and his membership on the Board Audit Committee
commencing on the same date until the end of the financial year.
(6) Peeyush Gupta received fees of $58,000 in 2022 in his capacity as a non-executive director of BNZ Life which were paid in NZD.
(7) Douglas McKay received fees of $315,000 in his capacity as Chair of Bank of New Zealand, which were paid in NZD.
(8) Alison Kitchen’s fee reflects a pro rata for the period from her appointment on 27 September to 30 September 2023, during which she prepared for the October Board
and Committee meetings.
(9) Carolyn Kay's fees reflect her remuneration since her appointment on 31 July 2023.
(10) Christine Fellowes' fees reflect her remuneration since her appointment on 5 June 2023.
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2023 Annual Report
151
Remuneration Report (cont.)
8.4 Non-executive directors' share ownership and other interests
The number of NAB shares held (directly and nominally) by each non-executive director of NAB and the Group or their related
parties (their close family members or any entity they, or their close family members, control, jointly control or significantly
influence) are set out below. No rights or performance options are granted to non-executive directors or their related parties.
Name
Non-executive directors
Philip Chronican (Chair)
David Armstrong
Kathryn Fagg
Peeyush Gupta
Anne Loveridge
Douglas McKay
Simon McKeon
Ann Sherry
Alison Kitchen(3)
Carolyn Kay(4)
Christine Fellowes(5)
Balance at
beginning
of year(1)
No.
42,120
20,740
9,426
9,571
12,120
11,972
15,000
12,698
-
-
-
Acquired
No.
-
1,186
-
-
-
-
-
-
-
5,567
3,438
Other
changes
during year
Balance at
end of year(2)
No.
No.
-
-
-
-
-
-
-
-
-
-
-
42,120
21,926
9,426
9,571
12,120
11,972
15,000
12,698
-
5,567
3,438
(1) Balance may include shares held prior to individuals becoming a non-executive director.
(2) All non-executive directors met or are on track to meet the minimum shareholding requirements for the year.
(3) Alison Kitchen's appointment was effective 27 September 2023.
(4) Carolyn Kay's appointment was effective 31 July 2023.
(5) Christine Fellowes' appointment was effective 5 June 2023.
152 National Australia Bank
Remuneration Report (cont.)
Section 9 - Loans, other transactions and other interests
9.1 Loans
Loans made to non-executive directors of NAB are made in the ordinary course of business on terms equivalent to those that
prevail in arm's length transactions. Loans to the Group CEO and Group Executives may be made on similar terms and conditions
generally available to other employees of the Group. Loans to KMP of NAB and the Group may be subject to restrictions under
applicable laws and regulations including the Corporations Act 2001 (Cth). The opening balance is 1 October and closing balance
is 30 September, or the date of commencement or cessation of a KMP.
Total aggregated loans provided to KMP and their related parties
NAB and the Group
KMP(4)
Other related parties(5)
Terms and
conditions
Balance at
beginning
of year(1)
Normal
Employee
Normal
$
11,938,677
22,120,918
17,103,246
Interest
charged(2)
$
550,119
765,091
661,749
Interest
not
Balance at
end of
charged(2)
Write-off(2)
year(3)
$
-
-
-
$
-
-
-
$
14,634,986
25,642,304
18,879,701
(1) For KMPs who commenced during the year, the balance is as at the date they became a KMP.
(2) Relates to the period during which the Group Executive was KMP.
(3) For KMPs who ceased during the year, the balance is as at the date they ceased to be a KMP.
(4) The aggregated loan balance at the end of the year includes loans issued to 19 KMP.
(5) Includes the KMP's related parties, which includes their close family members or any entity they or their close family members control, jointly control or
significantly influence.
Aggregated loans to KMP and their related parties above $100,000
NAB and the Group
Non-executive directors
David Armstrong
Kathryn Fagg
Doug McKay
Carolyn Kay
Group CEO
Ross McEwan
Group Executives
Sharon Cook
Shaun Dooley
Susan Ferrier
David Gall
Nathan Goonan
Daniel Huggins
Andrew Irvine
Gary Lennon
Les Matheson
Angela Mentis
Rachel Slade
Patrick Wright
Sarah White
Balance at
beginning
of year(1)
Interest
charged(2)
Interest
not
charged
KMP
highest
indebtedness
during
Balance at
end of
Write-off
year(3)
2023(4)
$
$
959,296
2,843,867
1,067,314
833,250
53,779
73,134
66,076
13,043
1,306,449
11,584
3,438,081
112,044
594,739
456,103
4,169,411
4,381,817
1,989,223
11,533,558
3,006,775
5,051,657
699,377
2,250,667
3,131,905
3,448,737
26,448
9,534
121,135
119,667
329,318
309,588
118,113
174,356
43,892
313,109
61,156
20,982
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
988,994
2,755,514
2,226,851
719,290
$
-
2,838,472
5,475
715,318
1,089,706
1,125,000
3,354,097
1,047,745
369,576
4,338,972
4,273,509
4,835,215
984,930
602,914
145,892
783,481
4,379,398
8,325,773
14,374,813
14,674,799
2,792,057
3,655,493
639,676
5,240,616
3,006,150
3,448,696
2,274,816
1,262,142
42,455
9,434,948
45,680
3,465,805
(1) For KMPs who commenced during the year, the balance is as at the date they became a KMP.
(2) The interest charged may include the impact of interest offset facilities and only relates to the period during which the non-executive director, Group CEO or Group
Executive was KMP.
(3) For KMPs who ceased during the year, the balance is as at the date they ceased to be a KMP.
(4) Represents aggregate highest indebtedness of the KMP during 2023. All other items in this table relate to the KMP and their related parties.
2023 Annual Report
153
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Remuneration Report (cont.)
9.2 Other transactions
From time to time various KMP and their related parties will hold investments in funds that are either managed, related to or
controlled by the Group. All such transactions with KMP and their related parties are made on terms equivalent to those that
prevail in arm's length transactions.
All other transactions that have occurred with KMP are made on terms equivalent to those that prevail in arm's length
transactions. These transactions generally involve the provision of financial and investment services including services to
eligible international assignees ensuring they are neither financially advantaged nor disadvantaged by their relocation. All such
transactions that have occurred with KMP and their related parties have been trivial or domestic in nature. In this context,
transactions are trivial in nature when they are considered of little or no interest to the users of the Remuneration Report in
making and evaluating decisions about the allocation of scarce resources. Transactions are domestic in nature when they relate
to personal household activities.
9.3 Other equity instrument holdings
In the year ending 30 September 2023, no KMP or their related parties held or transacted any equity instruments (either directly or
indirectly) other than the NAB shares and equity-based compensation disclosed in sections 7 and 8 .
9.4 Other relevant interests
Each KMP or their related parties from time to time invest in various debentures, registered schemes and securities offered by
NAB and certain subsidiaries of NAB. The level of interests held directly and indirectly as at 30 September 2023 were:
Name
Nature of product
Non-executive directors
Ann Sherry
Group Executives
Sharon Cook(1)
David Gall
NAB Capital Notes 3
NAB Capital Notes 3
NAB Subordinated Notes 2
NAB Capital Notes 5
(1) Sharon Cook redeemed 820 units of NAB Subordinated Notes 2 during the year on maturity.
Relevant
Interest (Units)
1,500
2,000
-
700
There are no contracts, other than those disclosed in table 9.4 immediately above, to which directors are a party, or under
which the directors are entitled to a benefit and that confer the right to call for, or deliver shares in, debentures of, or interests
in, a registered scheme made available by NAB or a related body corporate. All of the directors have disclosed interests in
organisations not related to the Group and are to be regarded as interested in any contract or proposed contract that may be
made between NAB and any such organisations.
154 National Australia Bank
Directors' signatures
This report of directors is signed in accordance with a resolution of the directors:
Philip Chronican
Chair
9 November 2023
Ross McEwan CBE
Group Chief Executive Officer
9 November 2023
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2023 Annual Report
155
156 National Australia Bank
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Auditor’s Independence Declaration to the Directors of National Australia Bank Limited As lead auditor for the audit of the financial report of National Australia Bank Limited for the financial year ended 30 September 2023, I declare to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; b) no contraventions of any applicable code of professional conduct in relation to the audit; and c) no non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. This declaration is in respect of National Australia Bank Limited and the entities it controlled during the financial year. Ernst & Young T M Dring Partner 9 November 2023 Ernst & Young8 Exhibition StreetMelbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auA member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards Legislation i
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Financial report
This page has been intentionally left blank. Financial report
Income statements
Statements of comprehensive income
Balance sheets
Statements of cash flows
Statements of changes in equity
Directors' declaration
Report on the audit of the financial report
160
161
162
163
165
255
256
Introduction
167
Other assets and liabilities
Note 1 Basis of preparation
167
Note 22 Goodwill and other intangible assets
Financial performance
169
Note 24 Provisions
Note 23 Other assets
Note 2 Segment information
Note 3 Net interest income
Note 4 Other income
Note 5 Operating expenses
Note 6 Income tax
Note 7 Earnings per share
Financial instruments
Assets
Note 8 Cash and balances with other banks
Note 9 Trading assets
Note 10 Debt instruments
Note 11 Other financial assets
Note 12 Loans and advances
Liabilities
Note 13 Deposits and other borrowings
Note 14 Bonds, notes and subordinated debt
Note 15 Debt issues
Note 16 Other financial liabilities
Risk management
170
172
173
174
176
178
179
182
182
183
183
184
184
185
187
188
Note 25 Other liabilities
Note 26 Leases
Capital management
Note 27 Contributed equity
Note 28 Non-controlling interests
Note 29 Reserves
Note 30 Dividends
Unrecognised items
Note 31 Commitments and contingent liabilities
Other disclosures
Note 32 Interest in subsidiaries and other entities
Note 33 Related party disclosures
Note 34 Remuneration of external auditor
Note 35 Equity-based plans
Note 36 Capital adequacy
Note 37 Notes to the statement of cash flows
Note 38 Acquisition of subsidiaries
Note 39 Events subsequent to reporting date
221
221
223
224
225
226
228
228
229
230
231
233
233
237
237
241
243
244
250
251
254
254
Note 17 Provision for credit impairment on loans at
189
amortised cost
Note 18 Derivatives and hedge accounting
Note 19 Financial risk management
Note 20 Fair value of financial instruments
Note 21 Financial asset transfers
195
203
216
220
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2023 Annual Report
159
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6
7
Financial report
Income statements
For the year ended 30 September
Note
Interest income
Effective interest rate method
Fair value through profit or loss
Interest expense
Net interest income
Other income
Operating expenses
Credit impairment charge
Profit before income tax
Income tax expense
Net profit for the year from continuing operations
Net loss after tax for the year from discontinued operations
Net profit for the year
Attributable to non-controlling interests
Attributable to owners of the Company
Earnings per share
Basic
Diluted
Basic from continuing operations
Diluted from continuing operations
3
4
5
17
6
7
7
7
7
Group
Company
2023
$m
46,358
1,714
2022
$m
21,465
913
2023
$m
42,478
1,404
2022
$m
19,167
805
(31,265)
(7,538)
(30,894)
(8,799)
16,807
3,841
14,840
3,730
12,988
10,301
11,173
4,478
(9,382)
(8,702)
(8,423)
(7,765)
(654)
14,212
(2,200)
12,012
-
12,012
-
12,012
(48)
7,838
(1,893)
5,945
-
5,945
-
5,945
(816)
10,450
(2,980)
7,470
(51)
7,419
5
7,414
(124)
9,744
(2,684)
7,060
(169)
6,891
-
6,891
cents
cents
236.4
228.7
238.0
230.2
214.1
205.6
219.3
210.5
160 National Australia Bank
Financial report
Statements of comprehensive income
For the year ended 30 September
Note
Net profit for the year from continuing operations
Other comprehensive income
Items that will not be reclassified to profit or loss
Fair value changes on financial liabilities designated at fair value
attributable to the Group's own credit risk
Revaluation of land and buildings
Equity instruments at fair value through other comprehensive
income reserve:
Revaluation gains / (losses)
Tax on items transferred directly to equity
Total items that will not be reclassified to profit or loss
Items that will be reclassified subsequently to profit or loss
Cash flow hedge reserve
Cost of hedging reserve
Foreign currency translation reserve:
Currency adjustments on translation of foreign operations, net
of hedging
Transfer to the income statement on disposal or partial disposal of
foreign operations(1)
Debt instruments at fair value through other comprehensive
income reserve:
Revaluation losses
Transferred to the income statement
Tax on items transferred directly to equity
Total items that will be reclassified subsequently to profit or loss
Other comprehensive income for the year, net of income tax
Total comprehensive income for the year from continuing operations
Net loss after tax for the year from discontinued operations
Total comprehensive income for the year
Attributable to non-controlling interests(2)
Total comprehensive income attributable to owners of the Company
Group
Company
2023
$m
7,470
2022
$m
7,060
2023
$m
12,012
2022
$m
5,945
(67)
(4)
17
20
(34)
149
1
11
(43)
118
66
(160)
(2,510)
488
709
(29)
(14)
(32)
38
578
544
8,014
(51)
7,963
13
7,950
(776)
(29)
(125)
(199)
705
(2,446)
(2,328)
4,732
(169)
4,563
-
4,563
(70)
-
16
22
(32)
303
(44)
117
(29)
(14)
(32)
(63)
238
206
12,218
-
12,218
-
12,218
88
-
(4)
(26)
58
(2,813)
283
(22)
-
(125)
(199)
852
(2,024)
(1,966)
3,979
-
3,979
-
3,979
(1) Partial disposals of foreign operations include returns of capital made by foreign branches.
(2) The Group includes $8 million (2022: $nil) relating to foreign currency translation of the non-controlling interests in BNZ.
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2023 Annual Report
161
Group
Company
2023
$m
24,699
117,306
11,286
101,168
46,357
1,430
34,269
2022
$m
56,451
141,861
13,115
40,573
42,080
2,061
61,016
2023
$m
23,959
106,955
10,214
90,417
46,336
1,708
33,784
2022
$m
56,121
133,144
10,636
34,043
42,094
2,749
60,651
702,702
680,434
607,684
592,679
20
-
3,499
3,016
-
4,952
8,379
16
-
3,385
3,009
-
4,652
6,473
19
43,577
3,059
1,935
10,025
2,392
7,717
15
38,226
2,975
2,091
4,670
2,172
5,562
1,059,083
1,055,126
989,781
987,828
39,516
10,672
66,352
35,633
74,679
17,245
23,286
57,486
33,965
9,281
51,745
36,110
69,295
15,365
8,960
57,494
682,120
683,526
608,641
616,961
1,012
1,852
-
1,011
2,096
-
135,645
119,283
8,561
16,217
997,580
61,503
38,546
(1,192)
23,800
61,154
349
61,503
7,318
10,164
996,094
59,032
39,399
(1,839)
21,472
59,032
-
978
1,651
44,059
124,329
8,561
13,938
933,258
56,523
37,760
(1,565)
20,328
56,523
-
716
1,897
41,639
109,674
7,318
8,381
937,700
50,128
38,613
(1,874)
13,389
50,128
-
59,032
56,523
50,128
Financial report
Balance sheets
As at 30 September
Note
Assets
Cash and liquid assets
Due from other banks
Collateral placed
Trading assets
Debt instruments
Other financial assets
Derivative assets
Loans and advances
Current tax assets
Due from controlled entities
Deferred tax assets
Property, plant and equipment
Investments in controlled entities
Goodwill and other intangible assets
Other assets
Total assets
Liabilities
Due to other banks
Collateral received
Other financial liabilities
Derivative liabilities
Deposits and other borrowings
Current tax liabilities
Provisions
Due to controlled entities
Bonds, notes and subordinated debt
Debt issues
Other liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity (attributable to owners of the Company)
Non-controlling interests
Total equity
8
8
9
10
11
18
12
6
22
23
8
16
18
13
24
14
15
25
27
29
28
162 National Australia Bank
Financial report
Statements of cash flows
For the year ended 30 September
Cash flows from operating activities
Interest received
Interest paid
Dividends received
Net trading income received
Other income received
Operating expenses paid
Income tax paid
Group
Company
Note
2023
$m
2022
$m
2023
$m
2022
$m
47,338
(28,548)
2
4,993
2,572
(7,614)
(2,973)
21,518
(6,544)
28
5,370
2,527
(6,207)
(1,641)
43,275
(28,555)
2,053
4,083
1,704
(6,598)
(2,034)
19,164
(7,906)
2,052
4,995
1,955
(5,591)
(956)
Cash flows from operating activities before changes in operating assets
and liabilities
15,770
15,051
13,928
13,713
Changes in operating assets and liabilities
Net (increase) / decrease in
Collateral placed
Deposits with central banks and other regulatory authorities
Trading assets
Other financial assets designated at fair value
Loans and advances
Other assets
Net increase / (decrease) in
Collateral received
Deposits and other borrowings
Other financial liabilities designated at fair value
Other liabilities
Net funds advanced to and receipts from other banks
Net movement in derivative assets and liabilities
Changes in operating assets and liabilities arising from cash
flow movements
Net cash provided by / (used in) operating activities
37
Cash flows from investing activities
Movement in debt instruments
Purchases
Proceeds from disposal and maturity
Net movement in other debt and equity instruments
Net movement in amounts due from controlled entities
Net movement in shares in controlled entities
Net movement in shares in associates and joint ventures
Purchase of controlled entities and business combinations, net of
cash acquired
Proceeds from sale of controlled entities and business closures, net of
costs and cash disposed
Purchase of property, plant, equipment and software
Proceeds from sale of property, plant, equipment and software, net
of costs
2,075
10,490
(58,148)
682
(6,720)
(19,703)
6,273
624
528
(4,713)
10,490
(19,703)
(53,920)
1,036
6,661
491
(15,854)
(53,384)
(13,534)
(50,274)
(237)
3,173
(432)
2,641
(6,893)
(9,157)
44,592
296
(10,468)
153
(42,469)
(26,699)
12,624
75,530
(352)
(2,667)
5,121
(7,349)
13,170
28,221
(6,297)
(12,366)
43,099
814
(10,857)
2,300
(39,139)
(25,211)
11,245
73,298
2,910
(2,169)
4,452
(9,971)
14,868
28,581
(34,455)
(33,697)
(34,435)
(33,697)
31,296
29,084
31,280
29,071
59
-
-
-
-
(2)
-
-
(4)
(3,183)
(32)
(3,320)
5
-
-
82
176
(1,192)
(1,076)
82
(900)
-
(1)
-
(80)
3,162
(159)
-
(3,138)
-
(784)
(1)
Net cash provided by / (used in) investing activities
(4,210)
(8,703)
(7,320)
(5,626)
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2023 Annual Report
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Financial report
Statements of cash flows
For the year ended 30 September
Cash flows from financing activities
Group
Company
2023
$m
2022
$m
2023
$m
2022
$m
Repayments of bonds‚ notes and subordinated debt
(31,143)
(27,640)
(26,937)
(24,319)
Proceeds from issue of bonds‚ notes and subordinated debt‚ net of costs(1)
42,827
41,932
38,948
35,188
Payments for share buy-back
Purchase of shares for dividend reinvestment plan neutralisation
Purchase of treasury shares for employee share offer
Proceeds from debt issues, net of costs
Proceeds from issue of BNZ perpetual preference shares
Repayments of debt issues
Dividends and distributions paid (excluding dividend reinvestment plan)
Repayments of other financing activities
Net cash provided by / (used in) financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
(904)
(693)
(23)
(3,917)
(500)
-
(904)
(693)
(23)
(3,917)
(500)
-
1,243
1,983
1,243
1,983
336
-
(4,339)
(328)
6,976
(23,933)
62,179
-
(1,504)
(4,006)
(339)
6,009
25,527
37,881
-
-
(4,334)
(284)
7,016
(25,515)
55,183
2,113
-
(1,504)
(4,006)
(299)
2,626
25,581
30,462
(860)
Effects of exchange rate changes on balance of cash held in foreign currencies
2,343
(1,229)
Cash and cash equivalents at end of year
37
40,589
62,179
31,781
55,183
(1)
Includes RBNZ's FLP.
164 National Australia Bank
Financial report
Statements of changes in equity
Contributed
equity(1)
Reserves(2)
Group
Year to 30 September 2022
Balance at 1 October 2021
Net profit for the year from continuing operations
Net loss for the year from discontinued operations
Other comprehensive income for the year from
continuing operations
Total comprehensive income for the year
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
Issue of ordinary shares
On-market purchase of shares for dividend
reinvestment plan neutralisation
Share buy-back
Transfer from / (to) retained profits
Transfer from / (to) equity-based
compensation reserve
Equity-based compensation
Dividends paid(3)
$m
43,247
-
-
-
-
500
(500)
(3,917)
-
69
-
-
$m
550
-
-
-
-
-
(4)
(69)
113
-
Balance as at 30 September 2022
39,399
(1,839)
Year to 30 September 2023
Net profit for the year from continuing operations
Net loss for the year from discontinued operations
Other comprehensive income for the year from
continuing operations
Total comprehensive income for the year
Transactions with owners, recorded directly
in equity
Contributions by and distributions to owners
Issue of ordinary shares
On-market purchase of shares for dividend
reinvestment plan neutralisation
Share buy-back
Purchase of treasury shares for employee
share offer(4)
Transfer from / (to) retained profits
Transfer from / (to) equity-based
compensation reserve
Equity-based compensation
Dividends paid(3)
Other equity movements
Issue of BNZ perpetual preference shares(5)
-
-
-
-
693
(693)
(904)
(23)
-
74
-
-
-
-
-
583
583
-
-
-
-
7
(74)
131
-
-
Retained
profits
$m
18,982
7,060
Total
$m
62,779
7,060
(169)
(169)
(2,429)
(2,429)
101
6,992
(2,328)
4,563
-
-
-
4
-
-
(4,506)
21,472
7,465
(51)
(47)
7,367
-
-
-
-
(7)
-
-
500
(500)
(3,917)
-
-
113
(4,506)
59,032
7,465
(51)
536
7,950
693
(693)
(904)
(23)
-
-
131
(5)
(5)
Balance as at 30 September 2023
38,546
(1,192)
23,800
61,154
(1) Refer to Note 27 Contributed equity for further details.
(2) Refer to Note 29 Reserves for further details.
(3) Refer to Note 30 Dividends for further details.
(4) This represents an on-market purchase of 748,032 shares at an average price of $30.70 per share.
(5) Refer to Note 28 Non-controlling interests for further details.
Non-
controlling
interests
$m
-
-
-
-
-
-
-
-
-
-
-
-
-
5
-
8
13
-
-
-
-
-
-
-
Total
equity
$m
62,779
7,060
(169)
(2,328)
4,563
500
(500)
(3,917)
-
-
113
(4,506)
59,032
7,470
(51)
544
7,963
693
(693)
(904)
(23)
-
-
131
341
349
336
61,503
2023 Annual Report
165
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(5,027)
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Financial report
Statements of changes in equity
Company
Year to 30 September 2022
Balance at 1 October 2021
Net profit for the year from continuing operations
Other comprehensive income for the year from continuing operations
Total comprehensive income for the year
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Issue of ordinary shares
On-market purchase of shares for dividend reinvestment
plan neutralisation
Share buy-back
Transfer from / (to) retained profits
Transfer from / (to) equity-based compensation reserve
Equity-based compensation
Dividends paid(3)
Balance as at 30 September 2022
Year to 30 September 2023
Net profit for the year from continuing operations
Other comprehensive income for the year from continuing operations
Total comprehensive income for the year
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Issue of ordinary shares
On-market purchase of shares for dividend reinvestment
plan neutralisation
Purchase of treasury shares for employee share offer(4)
Share buy-back
Transfer from / (to) retained profits
Transfer from / (to) equity-based compensation reserve
Equity-based compensation
Dividends paid(3)
Balance as at 30 September 2023
Contributed
equity(1)
Reserves(2)
$m
42,461
-
-
-
500
(500)
(3,917)
-
69
-
-
$m
99
-
(2,023)
(2,023)
-
-
-
6
(69)
113
-
38,613
(1,874)
-
-
-
693
(693)
(23)
(904)
-
74
-
-
-
254
254
-
-
-
-
(2)
(74)
131
-
37,760
(1,565)
Retained
profits
$m
11,899
5,945
57
6,002
-
-
-
(6)
-
-
(4,506)
13,389
12,012
(48)
11,964
-
-
-
-
2
-
-
(5,027)
20,328
Total
equity
$m
54,459
5,945
(1,966)
3,979
500
(500)
(3,917)
-
-
113
(4,506)
50,128
12,012
206
12,218
693
(693)
(23)
(904)
-
-
131
(5,027)
56,523
(1) Refer to Note 27 Contributed equity for further details.
(2) Refer to Note 29 Reserves for further details.
(3) Refer to Note 30 Dividends for further details.
(4) This represents an on-market purchase of 748,032 shares at an average price of $30.70 per share.
166 National Australia Bank
Notes to the financial statements
Introduction
Note 1
Basis of preparation
This is the financial report of National Australia Bank Limited (the Company) together with its controlled entities (Group) for the
year ended 30 September 2023. The Company, incorporated and domiciled in Australia, is a for-profit company limited by shares
which are publicly traded on the Australian Securities Exchange.
The directors resolved to authorise the issue of the financial report on 9 November 2023. The directors have the power to amend
and reissue the financial report.
The financial report includes information to the extent the Group considers it material and relevant to the understanding of
users. Disclosed information is considered material and relevant if, for example:
• The dollar amount is significant in size or by nature.
• The Group’s results cannot be understood by users without the specific disclosure.
• The information is important to help users understand the impact of significant changes in the Group’s business during the
financial year, for example, a business acquisition, disposal, or an impairment / write-down.
• The information relates to an aspect of the Group’s operations which is important to its future performance.
• The information is required under legislative requirements of the Corporations Act 2001 (Cth), the Banking Act 1959 (Cth) or
by the Group’s principal regulators, including the Australian Securities and Investments Commission (ASIC) and the Australian
Prudential Regulation Authority (APRA).
Basis of preparation
This general purpose financial report has been prepared by a for-profit company, in accordance with the requirements of
the Corporations Act 2001 (Cth) and accounting standards and interpretations issued by the Australian Accounting Standards
Board (AASB). Compliance with standards and interpretations issued by the AASB ensures that this financial report complies with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Amounts are presented in Australian dollars (unless otherwise stated), which is the Company’s functional and presentation
currency. These amounts have been rounded to the nearest million dollars ($m), except where indicated, as allowed by ASIC
Corporations Instrument 2016/191.
Unless otherwise stated, comparative information has been restated for any changes to presentation made in the current year.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount in the
Group's income statement and statement of comprehensive income.
To comply with its obligations as an Australian Financial Services Licence holder, the Group includes the separate financial
statements of the Company in this financial report, which is permitted by ASIC Corporations (Parent Entity Financial Statements)
Instrument 2021/195.
Basis of measurement
The financial report has been prepared under the historical cost convention, except for:
• Certain assets and liabilities (including derivative instruments) measured at fair value through profit or loss, or at fair value
through other comprehensive income.
•
Financial assets and liabilities that are otherwise measured on an amortised cost basis but adjusted for changes in fair value
attributable to the risk being hedged in qualifying fair value hedge relationships.
Accounting policies
During the year ended 30 September 2023, the Group revised its accounting treatment of ongoing trail commission payable to
mortgage brokers. The Group has recognised a liability within 'Other liabilities' equal to the present value of expected future trail
commission payments and a corresponding increase in capitalised brokerage costs within 'Loans and advances'. Comparative
information has not been restated.
Except as explained above, the accounting policies and methods of computation applied in this report are consistent with those
applied in the Group's 2022 Annual Report. There were no substantial amendments to Australian Accounting Standards adopted
during the year that have a material impact on the Group.
Critical accounting judgements and estimates
In the process of applying the Group’s accounting policies, management have made a number of judgements and assumptions
and applied estimates of future events. Some of these areas include:
•
•
•
Impairment charges on loans and advances.
Fair value of financial assets and liabilities.
Impairment assessment of goodwill and other intangible assets.
• Determination of income tax.
• Provisions for customer-related remediation and other regulatory matters.
Further details of these critical accounting judgements and estimates are provided in the respective notes to the
financial statements.
2023 Annual Report
167
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Notes to the financial statements
Note 1 Basis of preparation (cont.)
Other developments
Interest rate benchmark reform
Over the 2023 financial year, the Group has transitioned materially all contracts referencing Interbank Offered Rates (IBOR)
benchmarks subject to cessation at 30 June 2023. Additionally, fallback language continues to be updated for contracts
referencing IBOR benchmarks subject to cessation in 2024.
The Group continues to meet jurisdictional regulatory guidance and national working group timelines to cease referencing
IBOR benchmarks subject to cessation and IBOR benchmarks which have ceased in new transactions, and actively transition
legacy contracts to alternative risk-free rates. The Group continues to manage the risk arising from transition to ensure a low
probability of occurrence and impact to the Group and its customers. Following the cessation of some benchmarks on
31 December 2021 and 30 June 2023, and adoption of fallback rates in contracts with major counterparties (in particular, central
clearing counterparties), there has been a significant reduction in transition risk since 30 September 2022. In particular:
•
•
•
Following cessation of USD London Interbank Offered Rate (LIBOR) benchmarks on 30 June 2023, the Group’s exposure to
these benchmarks has reduced significantly. As at 30 September 2023, there is an immaterial exposure referencing the
synthetic version of some of the ceased benchmarks. These financial instruments are awaiting the next contractual rate
reset or customers have chosen to not transition for administrative reasons as their financial instruments mature before the
cessation of the relevant synthetic benchmark.
Financial instruments referencing other ceased IBOR benchmarks are not material.
Financial instruments referencing IBOR benchmarks subject to a future announced cessation are also not material.
Future accounting developments
AASB 17 Insurance Contracts (AASB 17) will be effective for the Group from 1 October 2023. The expected impact to the Group
from this new accounting standard is limited to the Group’s equity-accounted associate MLC Life. The change in timing of profit
recognition under AASB 17 is expected to result in a decrease in the carrying value of the MLC Life investment (included within
Note 23 Other assets) by approximately $200 million with a corresponding decrease in retained earnings as at 1 October 2023.
Refer to Note 32 Interest in subsidiaries and other entities for further information.
There are no other new standards or amendments to existing standards that are not yet effective which are expected to have a
material impact on the Group’s financial statements.
168 National Australia Bank
Notes to the financial statements
Financial performance
Overview
The Group’s reportable segments are unchanged from the 2022 Annual Report.
A description of the operating activities of each reportable segment is provided below:
• Business and Private Banking focuses on NAB's priority small and medium (SME) customer segments. This includes diversified
businesses, as well as specialised Agriculture, Health, Professional Services, Franchisees, Government, Education and
Community service segments along with Private Banking and JBWere.
• Personal Banking provides banking products and services to customers including securing a home loan and managing
personal finances through deposits, credit card or personal loan facilities. Customers are supported through a network
of branches and ATMs, call centres, digital capabilities as well as through proprietary lenders and mortgage brokers. Personal
Banking results include the financial performance of the Citi consumer business, acquired effective 1 June 2022.
• Corporate and Institutional Banking provides a range of products and services including client coverage, corporate finance,
markets, asset servicing, transactional banking and enterprise payments. The division serves its customers across Australia,
the United States, Europe and Asia, with specialised industry relationships and product teams. It includes Bank of New
Zealand's Markets Trading operations.
• New Zealand Banking provides banking and financial services across customer segments in New Zealand. It consists of
Partnership Banking servicing retail, business and private customers; Corporate and Institutional Banking servicing corporate
and institutional customers, and includes Markets Sales operations in New Zealand. New Zealand Banking also includes the
Wealth franchise operating under the ‘Bank of New Zealand’ brand. It excludes the Bank of New Zealand’s Markets Trading
operations. New Zealand Banking results include the financial performance of the New Zealand liquidity management portfolio,
effective 1 October 2022.
• Corporate Functions and Other includes ubank and enabling units that support all businesses including Treasury, Technology
and Enterprise Operations, Digital, Data and Analytics, Support Units and eliminations.
The Group evaluates performance on the basis of cash earnings as it better reflects what is considered to be the underlying
performance of the Group. Cash earnings is a non-IFRS key financial performance measure used by the Group and the
investment community.
Cash earnings is calculated by adjusting statutory net profit from continuing operations for certain non-cash earnings items.
Non-cash earnings items are those items which are considered separately when assessing performance and analysing the
underlying trends in the business. Cash earnings for the year ended 30 September 2023 has been adjusted for hedging and fair
value volatility, amortisation of acquired intangible assets, and certain other items associated with acquisitions, disposals and
business closures. Cash earnings does not purport to represent the cash flows, funding or liquidity position of the Group, nor any
amount represented on a statement of cash flows.
The Group earns the vast majority of its revenue in the form of net interest income, being the difference between interest
earned on financial assets and interest paid on financial liabilities and other financing costs.
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2023 Annual Report
169
Notes to the financial statements
Note 2
Segment information
Reportable segment information
Net interest income
Other income
Net operating income
Operating expenses
Underlying profit / (loss)
Credit Impairment (charge) / write-back
Cash earnings / (loss) before tax
and distributions
Income tax (expense) / benefit
Cash earnings / (loss) before non-
controlling interests
Non-controlling interests
Cash earnings / (loss)
Hedging and fair value volatility
Other non-cash earnings items
Net profit / (loss) for the year from
continuing operations
Net loss from discontinued operations
attributable to owners of the Company
Net profit / (loss) attributable to owners
of the Company
2023
Business
and
Private
Banking
Corporate
and
Institutional
Banking(1)
Personal
Banking
New
Zealand
Banking(1)
Corporate
Functions
and Other(2)
$m
$m
$m
$m
7,270
976
8,246
(2,931)
5,315
(568)
4,747
(1,429)
3,318
-
3,318
(2)
(9)
4,329
567
4,896
(2,561)
2,335
(287)
2,048
(602)
1,446
-
1,446
(6)
(17)
2,361
1,593
3,954
(1,452)
2,502
(32)
2,470
(600)
1,870
-
1,870
(95)
-
2,616
536
3,152
(1,105)
2,047
(85)
1,962
(553)
1,409
(5)
1,404
(8)
-
$m
231
175
406
(974)
(568)
170
(398)
91
(307)
-
(307)
82
(211)
Total
Group
$m
16,807
3,847
20,654
(9,023)
11,631
(802)
10,829
(3,093)
7,736
(5)
7,731
(29)
(237)
3,307
1,423
1,775
1,396
(436)
7,465
-
-
-
-
(51)
(51)
3,307
1,423
1,775
1,396
(487)
7,414
Reportable segment assets(3)
255,451
247,934
282,809
117,090
155,799
1,059,083
(1) For the year ended 30 September 2023, the New Zealand liquidity management portfolio of $18.3 billion of assets is reported within New Zealand Banking. Previously the
assets and liabilities together with the related income was reported as part of Corporate and Institutional Banking. Comparative information has not been restated.
(2) Corporate Functions and Other includes eliminations.
(3) Reportable segment assets include inter-company balances which are eliminated within the Corporate Functions and Other segment.
170 National Australia Bank
Notes to the financial statements
Note 2 Segment information (cont.)
2022
Business
and
Private
Banking
Corporate
and
Institutional
Banking
Personal
Banking
$m
$m
$m
New
Zealand
Banking
$m
6,074
962
7,036
(2,664)
4,372
(60)
4,312
(1,299)
3,013
(2)
(2)
4,055
524
4,579
(2,311)
2,268
5
2,273
(682)
1,591
9
(7)
2,058
1,413
3,471
(1,377)
2,094
26
2,120
(492)
1,628
90
-
2,302
518
2,820
(971)
1,849
(47)
1,802
(507)
1,295
40
-
3,009
1,593
1,718
1,335
-
-
-
-
3,009
1,593
1,718
1,335
Corporate
Functions
and Other(1)
$m
363
27
390
(951)
(561)
(49)
(610)
187
(423)
(68)
(104)
(595)
(169)
(764)
Total
Group
$m
14,852
3,444
18,296
(8,274)
10,022
(125)
9,897
(2,793)
7,104
69
(113)
7,060
(169)
6,891
Reportable segment information
Net interest income
Other income
Net operating income
Operating expenses
Underlying profit / (loss)
Credit Impairment (charge) / write-back
Cash earnings / (loss) before tax
and distributions
Income tax (expense) / benefit
Cash earnings / (loss)
Hedging and fair value volatility
Other non-cash earnings items
Net profit / (loss) for the year from
continuing operations
Net loss from discontinued operations
attributable to owners of the Company
Net profit / (loss) attributable to owners
of the Company
Reportable segment assets(2)
235,322
244,822
348,035
93,243
133,704
1,055,126
(1) Corporate Functions and Other includes eliminations.
(2) Reportable segment assets include inter-company balances which are eliminated within the Corporate Functions and Other segment.
Major customers
No single customer contributes revenue greater than 10% of the Group’s revenues.
Geographical information
The Group has operations in Australia (the Company’s country of domicile), New Zealand, Europe, the United States and Asia. The
allocation of income and non-current assets is based on the geographical location in which transactions are booked.
Australia
New Zealand
Other International
Total before inter-geographic eliminations
Elimination of inter-geographic items
Total
Group
Income
Non-current assets(1)
2023
$m
16,674
3,218
1,051
20,943
(295)
20,648
2022
$m
14,746
2,953
936
18,635
(65)
18,570
2023
$m
7,115
1,275
118
8,508
-
8,508
2022
$m
7,081
986
108
8,175
-
8,175
(1) Non-current assets includes goodwill and other intangible assets, property, plant and equipment and investments in joint ventures and associates.
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2023 Annual Report
171
Notes to the financial statements
Note 3
Net interest income
Accounting policy
Interest income and expense are recognised in the income statement using the effective interest method. The effective
interest method measures the amortised cost of a financial asset or financial liability using the effective interest rate. The
effective interest rate discounts the estimated stream of future cash payments or receipts over the expected life of the
financial instrument to the net carrying amount of the financial instrument.
Fees and costs which form an integral part of the effective interest rate of a financial instrument (for example, loan
origination fees) are recognised using the effective interest method and recorded in interest income or expense
depending on whether the underlying instrument is a financial asset or liability.
Included in net interest income are interest income and expense on trading assets, hedging instruments and financial
instruments measured at fair value through profit or loss.
Group
Company
2023
$m
2022
$m
2023
$m
2022
$m
5,253
35,807
-
3,554
1,744
46,358
1,607
107
1,714
930
19,542
-
592
401
21,465
803
110
913
48,072
22,378
1,705
19,889
7,083
-
362
640
375
3,832
1,726
-
224
394
4,713
30,175
2,586
3,261
1,743
42,478
1,328
76
1,404
43,882
1,525
17,636
6,413
3,515
362
555
29,679
6,551
30,006
51
1,163
1,214
372
31,265
16,807
5
635
640
347
7,538
14,840
51
465
516
372
30,894
12,988
767
16,264
1,183
553
400
19,167
712
93
805
19,972
343
3,191
1,598
2,527
224
371
8,254
5
193
198
347
8,799
11,173
Interest income
Effective interest rate method
Amortised cost
Due from other banks
Loans and advances
Due from controlled entities
Other interest income
Fair value through other comprehensive income
Debt instruments
Total effective interest method
Fair value through profit or loss
Trading instruments
Other financial assets
Total fair value through profit or loss
Total interest income
Interest expense
Effective interest rate method
Due to other banks
Deposits and other borrowings
Bonds, notes and subordinated debt
Due to controlled entities
Debt issues
Other interest expense
Total effective interest method
Fair value through profit or loss
Trading instruments
Other financial liabilities
Total fair value through profit or loss
Bank levy
Total interest expense
Net interest income
172 National Australia Bank
Notes to the financial statements
Note 4
Other income
Accounting policy
Categories of other income are measured as follows:
Item
Measurement basis
Trading instruments
Hedge ineffectiveness
Financial instruments
designated at fair value
Dividend revenue
Lending fees and other
fees and commissions
Net investment
management income
Trading derivatives - Total fair value change (including interest income or expense).
Trading assets - All fair value changes except for interest income or expense, which is
recognised within net interest income.
Represents hedge ineffectiveness arising from hedge accounting, which are the fair
value movements (excluding interest income or expense) that do not offset the
hedged risk.
Includes fair value movements on such items, other than interest income or expense
and movements attributable to the Group’s own credit risk.
Dividend revenue is recognised in the income statement when the Group’s right to
receive the dividend is established.
Unless included in the effective interest rate, fees and commissions are recognised
on an accruals basis when the service has been provided or on completion of the
underlying transaction. Fees charged for providing ongoing services (for example,
maintaining and administering existing facilities) are recognised as income over the
period the service is provided.
When a third party is involved in providing goods or services to the Group's customer,
the Group assesses whether the nature of the arrangement with its customer is as
a principal or an agent of the third party. When the Group is not acting in a principal
capacity, the income earned by the Group is net of the amounts paid to the third
party provider. The net consideration represents the Group's income for facilitating
the transaction.
Investment management income is recognised on an accruals basis as the services
are provided and is presented net of direct and incremental investment management
expenses incurred in the provision of these services.
Net fees and commissions
Lending fees
Other fees and commissions(1)
Net investment management income
Investment management income
Investment management expense
Total net fees and commissions
Gains less losses on financial instruments at fair value
Trading instruments
Hedge ineffectiveness
Financial instruments designated at fair value
Total gains less losses on financial instruments at fair value
Other operating income
Dividend revenue(2)
Net other income(3)
Total net other operating income
Total other income
Group
Company
2023
$m
1,141
893
304
(155)
2,183
1,141
(21)
390
1,510
2
146
148
3,841
2022
$m
1,125
838
296
(140)
2,119
(196)
58
1,205
1,067
28
516
544
3,730
2023
$m
932
667
-
-
2022
$m
925
618
-
-
1,599
1,543
813
(27)
418
1,202
7,423
77
7,500
10,301
30
31
592
653
2,053
229
2,282
4,478
(1) The Group recognised customer-related remediation charges of $29 million (2022: $71 million charge) and the Company recognised customer-related remediation
charges of $39 million (2022: $40 million charge) in other fees and commissions. Customer-related remediation charges in the Company include MLC Wealth-related
matters which are presented in discontinued operations at the Group level.
(2) In the 2023 financial year, the Company received a dividend of $5.4 billion from National Equities Limited (following a dividend payment by BNZ) which was reinvested into
additional ordinary shares.
(3) On 30 September 2022, the Group completed the disposal of BNZ Life, resulting in an overall gain on disposal of $197 million in other income.
2023 Annual Report
173
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Notes to the financial statements
Note 5
Operating expenses
Accounting policy
Operating expenses are recognised as services are provided to the Group, over the period in which an asset is consumed
or once a liability is created.
Amounts received by the Group as a reimbursement for costs incurred are recognised as a reduction of the
related expense.
Annual leave, long service leave and other personnel expenses
Salaries, annual leave and other employee entitlements expected to be paid or settled within 12 months of employees
rendering service are measured at their nominal amounts using remuneration rates that the Group expects to pay when
the liabilities are settled. A liability is recognised for the amount expected to be paid under short-term cash bonuses when
the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably. All other employee entitlements that are not expected to be paid
or settled within 12 months of the reporting date are measured at the present value of net future cash flows. Employee
entitlements to long service leave are accrued using an actuarial calculation, which includes assumptions regarding
employee departures, leave utilisation and future salary increases.
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date,
or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits
for voluntary redundancy are recognised as an expense if the Group has made an offer of voluntary redundancy, it is
probable that the offer will be accepted, and the number of acceptances can be estimated reliably.
Refer to Note 24 Provisions for balances of provisions for employee entitlements.
Personnel expenses
Salaries and related on-costs
Superannuation costs-defined contribution plans
Performance-based compensation
Other expenses
Total personnel expenses
Occupancy and depreciation expenses
Rental expense
Depreciation and impairment
Other expenses
Total occupancy and depreciation expenses
General expenses
Fees and commissions expense
Amortisation of intangible assets
Advertising and marketing
Charges to provide for operational risk event losses
Communications, postage and stationery
Computer equipment and software
Data communication and processing charges
Professional fees
Impairment losses recognised
Other expenses
Total general expenses
Total operating expenses
Group
Company(1)
2023
$m
4,353
366
557
215
5,491
100
594
57
751
18
620
220
103
150
888
127
711
13
290
2022
$m
3,964
319
517
177
4,977
103
577
42
722
44
535
187
107
137
789
90
729
10
375
2023
$m
3,590
348
510
196
4,644
209
408
53
670
17
519
166
72
125
740
109
679
14
668
2022
$m
3,355
302
471
166
4,294
203
411
39
653
29
460
142
328
114
694
78
689
18
266
3,140
9,382
3,003
8,702
3,109
8,423
2,818
7,765
(1) Operating expenses in the Company include amounts which are presented in discontinued operations at the Group level.
174 National Australia Bank
Notes to the financial statements
Note 5 Operating expenses (cont.)
Customer-related and payroll remediation
Customer-related remediation recognised by the Group relates to costs for executing the remediation programs for banking-
related matters. Payroll remediation relates to costs to address potential payroll issues relating to both current and former
Australian colleagues, comprising payments to colleagues and costs to execute the remediation program. The charges
recognised by the Company include costs related to the remediation programs for banking and MLC Wealth-related matters.
In the 2023 financial year, the Group recognised a charge of $20 million (2022: $45 million) and the Company recognised a charge
of $45 million (2022: $219 million) for customer-related remediation.
The payroll remediation program was largely completed in December 2022 with all known remediation matters resolved. No
charges were recognised in the 2023 financial year (2022: $55 million for the Group and $72 million for the Company).
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2023 Annual Report
175
Notes to the financial statements
Note 6
Income tax
Accounting policy
Income tax expense (or benefit) is the tax payable (or receivable) on the current year's taxable income based on the
applicable tax rate in each jurisdiction, adjusted by changes in deferred tax assets and liabilities. Income tax expense
is recognised in the income statement except to the extent that it relates to items recognised directly in other
comprehensive income, in which case it is recognised in the statement of comprehensive income. The tax associated
with these transactions will be recognised in the income statement at the same time as the underlying transaction.
Deferred tax assets and liabilities are recognised for temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts. Deferred tax is determined using tax rates (and laws) that have been enacted or
substantively enacted as at the reporting date and are expected to apply when the related deferred tax asset is realised
or the deferred tax liability is settled.
Deferred tax assets are only recognised for temporary differences, unused tax losses and unused tax credits if it is
probable that future taxable amounts will arise to utilise those temporary differences and losses. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will
be realised.
Deferred tax assets and deferred tax liabilities are offset where there is a legally enforceable right to offset current tax
assets and current tax liabilities and they relate to income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities which intend either to settle current tax liabilities and assets on a net basis or to realise
the assets and settle the liabilities simultaneously.
The Company and its wholly owned Australian subsidiaries are part of a tax consolidated group. The Company is the head
entity in the tax consolidated group. The members of the tax consolidated group have entered into tax funding and tax
sharing agreements, which set out the funding obligations of members. Any current tax liabilities / assets and deferred tax
assets from unused tax losses of subsidiaries in the tax consolidated group are recognised by the Company and funded in
line with the tax funding arrangements.
Critical accounting judgements and estimates
The Group undertakes transactions in the ordinary course of business where the income tax treatment requires the
exercise of judgement. The Group estimates the amount expected to be paid to tax authorities based on its understanding
and interpretation of relevant tax laws. The effect of uncertainty over income tax treatments is reflected in determining
the relevant taxable profit or tax loss, tax bases, unused tax losses and unused tax credits or tax rates. Uncertain tax
positions are presented as current or deferred tax assets or liabilities as appropriate.
Income tax expense
The income tax expense for the year reconciles to the profit before income tax as follows:
Profit before income tax
Prima facie income tax expense at 30%
Tax effect of permanent differences:
Assessable foreign income
Foreign tax rate differences
Adjustments to deferred tax balances for tax losses(1)
Foreign branch income not deductible / (assessable)
Over provision in prior years
Offshore banking unit adjustment
Restatement of deferred tax balances for tax rate changes
Non-deductible interest on convertible instruments
Dividend income adjustments
Gain on disposal of BNZ Life
Other
Income tax expense
Current tax expense
Deferred tax (benefit) / expense
Total income tax expense
Group
Company
2023
$m
10,450
3,135
11
(68)
(142)
6
(11)
(77)
(1)
109
-
-
18
2,980
3,081
(101)
2,980
2022
$m
9,744
2,923
7
(65)
(82)
(12)
(5)
(97)
(5)
67
-
(59)
12
2,684
2,365
319
2,684
2023
$m
14,212
4,264
11
(24)
(142)
6
(11)
(65)
(1)
109
(1,954)
-
7
2,200
2,323
(123)
2,200
2022
$m
7,838
2,351
7
(25)
(82)
(12)
(5)
(57)
4
67
(345)
-
(10)
1,893
1,569
324
1,893
(1)
In the 2023 financial year, adjustments relating to certain tax losses have been disaggregated from the line item 'Other,' and presented separately in the reconciliation.
Comparative information has been restated to align to the presentation in the 2023 financial year.
176 National Australia Bank
Notes to the financial statements
Note 6 Income tax (cont.)
Deferred tax assets and liabilities
The balance comprises temporary differences attributable to:
Deferred tax assets
Specific provision for credit impairment
Collective provision for credit impairment
Employee entitlements
Tax losses
Unrealised derivatives in funding vehicles
Other provisions
Depreciation
Reserves
Cash flow hedge reserve
Other reserves
Other
Total deferred tax assets
Set-off of deferred tax liabilities pursuant to set-off provisions
Net deferred tax assets
Deferred tax liabilities
Intangible assets
Defined benefit superannuation plan assets
Reserves
Other
Total deferred tax liabilities
Deferred tax liabilities set off against deferred tax assets pursuant to
set-off provisions
Net deferred tax liability
Deferred tax assets not brought to account
Group
Company
2023
$m
159
1,485
275
131
39
91
327
732
45
324
3,608
(109)
3,499
32
12
28
37
109
(109)
-
2022
$m
148
1,281
286
50
90
169
309
821
4
353
3,511
(126)
3,385
27
11
63
25
126
(126)
-
2023
$m
137
1,239
257
121
-
91
244
724
42
304
3,159
(100)
3,059
27
10
28
35
100
(100)
-
2022
$m
129
1,078
269
47
-
168
240
814
23
321
3,089
(114)
2,975
23
9
63
19
114
(114)
-
Deferred tax assets have not been brought to account for the following realised losses as the utilisation of the losses is not
regarded as probable:
Capital gains tax losses
Income tax losses
Group
Company
2023
$m
1,909
125
2022
$m
1,910
239
2023
$m
1,909
125
2022
$m
1,910
239
Income tax losses of $119m for the Group and Company are expected to expire between the 2030 to 2036 financial years. Capital
gains tax losses of the Group and Company do not have any expiry date.
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2023 Annual Report
177
Notes to the financial statements
Note 7
Earnings per share
Earnings ($m)
Net profit attributable to owners of the Company
7,414
6,891
7,414
6,891
Group
Basic
Diluted
2023
2022
2023
2022
Potential dilutive adjustments
Interest expense on convertible notes
Adjusted earnings
Net loss from discontinued operations attributable to owners of
the Company
Adjusted earnings from continuing operations
Weighted average number of ordinary shares (millions)
-
7,414
51
7,465
-
6,891
169
7,060
371
7,785
51
7,836
232
7,123
169
7,292
Weighted average number of ordinary shares (net of treasury shares)
3,136
3,219
3,136
3,219
Weighted average number of dilutive potential ordinary shares
Convertible notes
Share-based payments
-
-
-
-
Total weighted average number of ordinary shares
3,136
3,219
Earnings per share attributable to owners of the Company (cents)
Earnings per share from continuing operations
Earnings per share from discontinued operations
236.4
238.0
(1.6)
214.1
219.3
(5.2)
258
10
3,404
228.7
230.2
(1.5)
240
6
3,465
205.6
210.5
(4.9)
178 National Australia Bank
Notes to the financial statements
Financial instruments
Overview
Financial instruments represent the majority of the Group's balance sheet, including loans and advances, deposits, trading
assets and derivatives.
Initial recognition of financial instruments
A financial asset or financial liability is recognised on the balance sheet when the Group becomes a party to the contractual
provisions of the instrument. The Group recognises regular way transactions on the trade date.
All financial instruments are initially recognised at fair value. Directly attributable transaction costs are added to or deducted
from the carrying value of the asset or liability on initial recognition, unless the instrument is measured at fair value through profit
or loss, in which case they are recognised in profit or loss.
Classification
Subsequently, financial instruments are measured either at amortised cost or fair value depending on their classification.
Classification of financial assets is driven by the Group's business model for managing the asset and the contractual cash flows
of the asset. The Group uses the following flowchart to determine the appropriate classification for financial assets.
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Non-derivative financial liabilities are measured at amortised cost unless the Group elects to measure the financial liability at
fair value through profit or loss. The Group will elect to measure a financial liability at fair value through profit or loss if such
measurement significantly reduces or eliminates an accounting mismatch.
Refer to the table at the end of this section for a summary of the classification of the Group's financial instruments.
2023 Annual Report
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Notes to the financial statements
Overview (cont.)
Measurement
Financial instruments measured at amortised cost
Amortised cost is the amount at which a financial asset or financial liability is measured at initial recognition minus principal
repayments, plus or minus the cumulative amortisation of transaction costs, premiums or discounts using the effective interest
method, and for financial assets, adjusted for any loss allowance.
Financial assets measured at fair value through other comprehensive income
Gains or losses arising from changes in the fair value of debt instruments measured at fair value through other comprehensive
income are recognised in other comprehensive income and accumulated in a separate component of equity. Upon disposal,
the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to the
income statement.
Investments in equity instruments that are neither held for trading nor contingent consideration recognised by the Group in a
business combination to which AASB 3 Business Combinations applies, are measured at fair value through other comprehensive
income, where an irrevocable election has been made by management. Amounts recognised in other comprehensive income are
not subsequently transferred to profit or loss. Dividends on such investments are recognised in profit or loss unless the dividend
clearly represents a recovery of part of the cost of the investment.
Financial instruments at fair value through profit or loss
Changes in the fair value of financial assets are recognised in profit or loss.
Where a financial liability is designated at fair value through profit or loss, the movement in fair value attributable to changes in
the Group’s own credit risk is calculated by determining the changes in own credit spreads and is recognised separately in other
comprehensive income.
Derivative financial instruments and hedge accounting
Derivative financial instruments are contracts whose value is derived from an underlying price, index or other variable, and
include instruments such as swaps, forward rate agreements, futures and options.
All derivatives are recognised initially on the balance sheet at fair value and are subsequently measured at fair value through
profit or loss, except where they are designated as a part of an effective hedge relationship and classified as hedging
derivatives. Derivatives are presented as assets when their fair value is positive and as liabilities when their fair value is negative.
The method of recognising the resulting fair value gain or loss on a derivative depends on whether the derivative is designated
as a hedging instrument, and if so, the nature of the item being hedged. Refer to Note 18 Derivatives and hedge accounting.
Derecognition of financial instruments
The Group derecognises a financial asset when the contractual cash flows from the asset expire or it transfers its rights to
receive contractual cash flows from the financial asset in a transaction in which substantially all the risks and rewards of
ownership are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a
separate asset or liability.
The Group derecognises a financial liability when the obligation specified in the contract is discharged, cancelled or expires.
Reverse repurchase and repurchase agreements (and similar lending and borrowing)
The Group executes reverse repurchase agreements where it purchases a security under an agreement to resell that security
at a predetermined price. These securities are not recognised on the balance sheet because the Group does not acquire
the risks and rewards of ownership of the security. Consideration paid for the purchase is accounted for as a reverse
repurchase agreement and classified as a financial asset. Reverse repurchase agreements that are part of a portfolio of
financial instruments managed together for short-term profit taking are measured at fair value through profit or loss and are
included within Note 9 Trading assets. All other reverse repurchase agreements are measured at amortised cost.
The Group also executes repurchase agreements, where it sells a security under an agreement to repurchase that security at
a predetermined price. These securities are not derecognised from the balance sheet because the Group retains substantially
all of the risks and rewards of ownership of the security. Consideration received for the sale is accounted for as a repurchase
agreement and classified as a financial liability. Repurchase agreements that are part of a portfolio of financial instruments
managed together for short-term profit taking are measured at fair value through profit or loss and are included within Note 16
Other financial liabilities. All other repurchase agreements are measured at amortised cost.
180 National Australia Bank
Notes to the financial statements
Overview (cont.)
Summary of classification and measurement basis
Financial assets
Type of instrument
Loans and advances (customer loans
and facilities)
Classification
and
measurement
Amortised cost
Trading assets (bonds, reverse repurchase
agreements, notes or securities issued
by government, financial institutions or
other corporates)
Other financial assets
Debt instruments (bonds, notes or
securities issued by government, financial
institutions or other corporates)
Derivatives (forwards, swaps,
futures, options)
Fair value through
profit or loss
Fair value through
other
comprehensive
income
Fair value(1)
Reason
Cash flows represent solely payments
of principal and interest, held with
the objective to collect contractual
cash flows
Principal purpose is selling or
repurchasing in the near term, or part of a
portfolio of financial instruments that are
managed together and for which there is
evidence of short-term profit taking
Cash flows are not solely payments of
principal and interest or designated at fair
value through profit or loss to eliminate
an accounting mismatch
Cash flows represent solely payments
of principal and interest, held with the
objective to both collect contractual
cash flows or to sell
Trading derivatives - not in a qualifying
hedging relationship
Hedging derivatives - designated in a
qualifying hedging relationship
Note
Note 12 Loans
and advances
Note 9
Trading assets
Note 11 Other
financial assets
Note 10
Debt instruments
Note 18
Derivatives and
hedge accounting
Financial liabilities
Type of instrument
Deposits and other borrowings
(deposits, commercial paper,
repurchase agreements)
Bonds and notes
Classification
and
measurement
Reason
Not designated at fair value through profit
or loss
Amortised cost
Note
Note 13
Deposits and
other borrowings
Note 14 Bonds,
notes and
subordinated debt
Note 15 Debt issues
Perpetual notes and convertible notes
Certain bonds, notes and deposits
Repurchase agreements, securities short
sold, other financial liabilities
Fair value through
profit or loss(2)
Derivatives (forwards, swaps,
futures, options)
Fair value(1)
Designated at fair value through profit or
loss to eliminate an accounting mismatch
Note 16 Other
financial liabilities
Part of a portfolio of financial instruments
that are managed together and for
which there is evidence of short-term
profit taking
Trading derivatives - not in a qualifying
hedging relationship
Hedging derivatives - designated in a
qualifying hedging relationship
Note 18
Derivatives and
hedge accounting
(1) Fair value movements on trading derivatives are recognised in profit or loss. The recognition of the fair value movements on hedging derivatives will depend on the
type of hedge (i.e. fair value hedge or cash flow hedge). Refer to Note 18 Derivatives and hedge accounting.
(2) Except for changes in own credit risk which are recognised in other comprehensive income.
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2023 Annual Report
181
Notes to the financial statements
Note 8
Cash and balances with other banks
Accounting policy
Cash and liquid assets, and balances with other banks are initially measured at fair value and subsequently at amortised
cost. For the purposes of the statement of cash flows, cash and cash equivalents include cash and liquid assets (including
reverse repurchase agreements and short-term government securities) and amounts due from other banks net of
amounts due to other banks that are highly liquid, readily convertible to known amounts of cash within three months
and are subject to an insignificant risk of changes in value. They are held for the purposes of meeting short-term cash
commitments (rather than for investment or other purposes). Refer to Note 37 Notes to the statement of cash flows for a
detailed reconciliation of cash and cash equivalents.
Cash and liquid assets
Coins, notes and cash at bank
Reverse repurchase agreements(1)
Other (including bills receivable and remittances in transit)
Total cash and liquid assets
Due from other banks
Central banks
Other banks(1)
Total due from other banks
Due to other banks
Central banks(2)
Other banks(1)
Total due to other banks
Group
Company
2023
$m
1,030
21,808
1,861
24,699
105,034
12,272
117,306
25,394
14,122
39,516
2022
$m
1,147
53,785
1,519
56,451
113,232
28,629
141,861
40,824
33,855
74,679
2023
$m
937
21,350
1,672
23,959
95,638
11,317
106,955
21,041
12,924
33,965
2022
$m
1,021
53,725
1,375
56,121
105,857
27,287
133,144
37,713
31,582
69,295
(1) During the 2023 financial year, the Group established a new portfolio of reverse repurchase agreements, which is managed together with other financial instruments
for short-term profit taking. These agreements are measured at fair value through profit or loss and are included in Note 9 Trading assets.
(2) Included within amounts due to central banks is $21,869 million (2022: $35,316 million) for the Group and $17,596 million (2022: $32,275 million) for the Company relating to
the TFF provided by the RBA and the TLF, FLP provided by the RBNZ.
Note 9
Trading assets
Accounting policy
Trading assets comprise assets that are classified as held for trading because they are acquired or incurred principally
for the purpose of selling or repurchasing in the near term, or form part of a portfolio of financial instruments that are
managed together and for which there is evidence of short-term profit taking. Trading assets are measured at fair value
through profit or loss. Trading assets include commodities measured at fair value less cost to sell in accordance with AASB
102 Inventories.
Trading assets
Government bonds, notes and securities
Semi-government bonds, notes and securities
Corporate / financial institution bonds, notes and securities
Reverse repurchase agreements(1)
Commodity inventory at fair value
Other bonds, notes, securities, equities and other assets
Total trading assets
Group
Company
2023
$m
29,237
10,092
5,360
55,403
610
466
101,168
2022
$m
26,127
5,346
8,681
-
-
419
40,573
2023
$m
26,690
6,887
3,392
52,373
610
465
90,417
2022
$m
23,036
2,989
7,598
-
-
420
34,043
(1) During the 2023 financial year, the Group established a new portfolio of reverse repurchase agreements, which is managed together with other financial instruments
for short-term profit taking.
182 National Australia Bank
Notes to the financial statements
Note 10
Debt instruments
Accounting policy
Debt instruments are measured at fair value through other comprehensive income as they are held in a business model
with the objective of both collecting contractual cash flows and realising assets through sale and they have contractual
cash flows which are considered to be solely payments of principal and interest.
Group
Company
2023
$m
2,691
28,892
8,238
6,536
46,357
2022
$m
3,626
25,275
6,933
6,246
42,080
2023
$m
2,691
28,892
8,238
6,515
46,336
2022
$m
3,626
25,275
6,933
6,260
42,094
Debt instruments
Government bonds, notes and securities
Semi-government bonds, notes and securities
Corporate / financial institution bonds, notes and securities
Other bonds, notes and securities
Total debt instruments
Note 11
Other financial assets
Accounting policy
Other financial assets are measured at fair value through profit or loss. Changes in fair value and transaction costs are
recognised in the income statement. Financial assets are measured at fair value through profit or loss when they have
contractual cash flow characteristics that are not considered to be solely payments of principal and interest or they have
been designated as such to eliminate or reduce an accounting mismatch.
Other financial assets
Loans at fair value
Other financial assets at fair value
Total other financial assets
Group
Company
2023
$m
1,243
187
1,430
2022
$m
1,876
185
2,061
2023
$m
682
1,026
1,708
2022
$m
1,305
1,444
2,749
The maximum credit exposure of loans (excluding any undrawn facility limits) included in other financial assets is $1,243 million
(2022: $1,876 million) for the Group and $682 million (2022: $1,305 million) for the Company. The cumulative change in fair value
of the loans attributable to changes in credit risk amounted to a $33 million loss (2022: $49 million loss) for the Group and a
$27 million loss (2022: $28 million loss) for the Company.
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2023 Annual Report
183
Notes to the financial statements
Note 12
Loans and advances
Accounting policy
Loans and advances are financial assets for which the contractual cash flows are solely payments of principal and interest
and that are held in a business model with the objective of collecting contractual cash flows.
Loans and advances are initially recognised at fair value plus transaction costs directly attributable to the origination of
the loan or advance, which are primarily brokerage and origination fees. Subsequently, loans and advances are measured
at amortised cost using the effective interest rate method, net of any provision for credit impairment.
Loans and advances
Housing loans
Other term lending
Asset and lease financing
Overdrafts
Credit card outstandings
Other lending
Total gross loans and advances
Unearned income and deferred net fee income(1)
Capitalised brokerage costs(1)(2)
Provision for credit impairment
Total net loans and advances
Group
Company
2023
$m
406,298
261,520
17,214
5,459
9,528
7,209
2022
$m
389,124
260,487
14,988
4,689
8,684
7,867
2023
$m
352,113
223,490
17,158
3,420
8,609
6,766
2022
$m
340,278
224,128
14,937
2,819
7,816
7,467
707,228
685,839
611,556
597,445
(1,453)
2,512
(5,585)
(1,020)
671
(5,056)
(1,536)
2,357
(4,693)
(1,067)
633
(4,332)
702,702
680,434
607,684
592,679
(1) During the 2023 financial year, upfront brokerage costs previously presented as a net number within Unearned income and deferred net fee income were separately
classified as Capitalised brokerage costs to better align with the nature of the balances. Comparative information has been restated accordingly.
(2) The balance as at 30 September 2023 includes $1,795 million for the Group and $1,684 million for the Company of capitalised brokerage costs reflecting the revised
accounting treatment of trail commissions payable to mortgage brokers. Comparative information has not been restated. Refer to Note 1 Basis of preparation for
further information.
Note 13
Deposits and other borrowings
Accounting policy
Deposits and other borrowings are initially recognised at fair value less directly attributable transaction costs and
subsequently measured at amortised cost.
Deposits and other borrowings
Term deposits
On-demand and short-term deposits
Certificates of deposit
Deposits not bearing interest
Commercial paper and other borrowings
Repurchase agreements(1)
Total deposits and other borrowings
Group
Company
2023
$m
191,924
299,969
55,290
95,491
35,255
4,191
682,120
2022
$m
156,049
310,347
48,555
100,289
44,346
23,940
683,526
2023
$m
159,535
272,035
55,290
82,754
34,835
4,192
2022
$m
131,275
281,021
48,555
89,029
43,150
23,931
608,641
616,961
(1) During the 2023 financial year, the Group established a new portfolio of repurchase agreements, which is managed together with other financial instruments for
short-term profit taking. These agreements are measured at fair value through profit or loss and are included in Note 16 Other financial liabilities.
184 National Australia Bank
Notes to the financial statements
Note 14
Bonds, notes and subordinated debt
Accounting policy
Bonds, notes and subordinated debt are initially recognised at fair value less directly attributable transaction costs and
subsequently measured at amortised cost using the effective interest method. Premiums, discounts and associated issue
expenses are recognised using the effective interest method through the income statement from the date of issue.
Group
Company
Bonds, notes and subordinated debt
Medium-term notes
Securitisation notes
Covered bonds
Subordinated medium-term notes
2023
$m
83,218
2,593
30,093
19,741
2022
$m
74,076
3,504
23,511
18,192
Total bonds, notes and subordinated debt
135,645
119,283
Issued bonds, notes and subordinated debt by currency
AUD
USD
EUR
GBP
JPY
CHF
Other
40,873
46,363
24,979
10,342
3,952
3,756
5,380
37,972
37,002
23,463
8,240
4,285
3,589
4,732
2023
$m
76,801
-
27,787
19,741
124,329
38,245
40,838
22,487
10,389
3,952
3,011
5,407
2022
$m
69,042
-
22,440
18,192
109,674
34,432
32,727
22,289
8,298
4,285
2,908
4,735
Total bonds, notes and subordinated debt
135,645
119,283
124,329
109,674
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2023 Annual Report
185
Notes to the financial statements
Note 14 Bonds, notes and subordinated debt (cont.)
Subordinated medium-term notes
Notional amount
Currency
amount (m)(1)
Currency
SGD
AUD
AUD
AUD
AUD
CAD
AUD
USD
USD
GBP
AUD
AUD
AUD
JPY
AUD
AUD
HKD
AUD
AUD
HKD
USD
USD
AUD
USD
AUD
AUD
AUD
AUD
USD
AUD
AUD
Total
450
943
20
20
1,000
1,000
1,250
1,500
1,250
600
1,175
225
275
17,000
1,000
250
382
950
300
640
1,250
1,500
205
1,250
85
215
245
100
1,250
195
203
Rate
Fixed
Float
Fixed
Fixed
Float
Fixed
Float
Fixed
Fixed
Fixed
Float
Fixed
Fixed
Fixed
Fixed
Float
Fixed
Fixed
Float
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
First optional
call date(2)
Maturity
date(3)
n/a
n/a
n/a
n/a
2024
2025
2025
n/a
n/a
2026
2026
2026
2027
2027
2027
2027
2027
2028
2028
2028
n/a
2029
n/a
2032
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Matured 2023
Matured 2023
Buy-back 2023
Buy-back 2023
2029
2030
2030
2030
2031
2031
2031
2031
2032
2032
2032
2032
2032
2033
2033
2033
2033
2034
2035
2037
2037
2040
2040
2040
2041
2041
2042
Group
Company
2023
$m
-
-
-
-
1,000
1,080
1,250
1,785
1,561
994
1,175
205
262
174
1,000
250
71
950
300
122
1,796
2,004
205
1,549
85
122
140
57
1,206
195
203
2022
$m
479
942
23
23
1,000
1,061
1,250
1,806
1,603
858
1,175
201
260
180
1,000
250
71
-
-
-
-
2,037
205
1,602
85
129
148
60
1,346
195
203
2023
$m
-
-
-
-
1,000
1,080
1,250
1,785
1,561
994
1,175
205
262
174
1,000
250
71
950
300
122
1,796
2,004
205
1,549
85
122
140
57
1,206
195
203
2022
$m
479
942
23
23
1,000
1,061
1,250
1,806
1,603
858
1,175
201
260
180
1,000
250
71
-
-
-
-
2,037
205
1,602
85
129
148
60
1,346
195
203
19,741
18,192
19,741
18,192
(1) Subordinated medium-term notes qualify as Tier 2 capital, in some cases subject to transitional Basel III treatment.
(2) Reflects calendar year of first optional call date (subject to APRA's prior written approval).
(3) Reflects calendar year of maturity date.
186 National Australia Bank
Notes to the financial statements
Note 15
Debt issues
Accounting policy
Convertible notes are initially recognised at fair value less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.
Debt issues
Convertible notes
Total debt issues
The table below highlights the key features of the Group’s debt issuances.
Group
Company
2023
$m
8,561
8,561
2022
$m
7,318
7,318
2023
$m
8,561
8,561
2022
$m
7,318
7,318
Convertible notes(1)
NAB Capital Notes 3
NAB Capital Notes 5
NAB Capital Notes 6
NAB Capital Notes 7
Outstanding
amount
Issued date
Interest payment frequency
(in arrears)
$1.87bn
20 March 2019
Quarterly
Interest rate (per annum)
4.00% above 3 month BBSW
Maturity / Conversion
Mandatory
conversion
19 June 2028
Issuer
conversion option
17 June 2026
$2.39bn
17 December 2020
Quarterly
3.50% above 3 month BBSW
17 December 2029
17 December 2027
$2.00bn
7 July 2022
Quarterly
3.15% above 3 month BBSW
17 September 2032
17 December 2029(2)
$1.25bn
14 September 2023
Quarterly
2.80% above 3 month BBSW
17 June 2033
17 September 2030(3)
NAB Wholesale Capital Notes
$500m
12 December 2019
Semi-annually until the optional
call date. Quarterly thereafter.
4.95% until the optional call
date. 3.75% above 3 month
BBSW thereafter.
12 December 2031
12 December 2029
NAB Wholesale Capital Notes 2
$600m
17 July 2020
Quarterly
4.00% above 3 month BBSW
17 July 2027
17 July 2025
(1) All convertible notes are treated as AT1 capital.
(2) First optional conversion date of 17 December 2029, with subsequent optional conversion dates on 17 March 2030, 17 June 2030 and 17 September 2030.
(3) First optional conversion date of 17 September 2030, with subsequent optional conversion dates on 17 December 2030, 17 March 2031 and 17 June 2031.
2023 Annual Report
187
Notes to the financial statements
Note 16
Other financial liabilities
Accounting policy
In certain circumstances, the Group applies the fair value measurement option to financial liabilities. This option is applied
where an accounting mismatch is significantly reduced or eliminated by measuring the financial liability at fair value
through profit or loss.
Where liabilities are designated at fair value through profit or loss, they are initially recognised at fair value, with
transaction costs recognised in the income statement as incurred. Subsequently, they are measured at fair value and
any gains or losses are recognised in the income statement, with the exception of changes in own credit risk which are
recognised in other comprehensive income.
Other financial liabilities designated at fair value
Bonds, notes and subordinated debt
Deposits and other borrowings
Certificates of deposit
Commercial paper and other borrowings
Other financial liabilities measured at fair value
Repurchase agreements(1)
Securities sold short
Other financial liabilities
Total other financial liabilities
Group
Company
2023
$m
2022
$m
2023
$m
2022
$m
13,741
15,061
4,371
4,479
1,477
854
42,547
6,697
1,036
66,352
1,463
2,016
-
3,575
1,171
23,286
-
-
39,860
6,476
1,038
51,745
-
-
-
3,310
1,171
8,960
(1) During the 2023 financial year, the Group established a new portfolio of repurchase agreements, which is managed together with other financial instruments for
short-term profit taking and measured at fair value through profit or loss.
The change in fair value of bonds, notes and subordinated debt attributable to changes in credit risk amounted to a loss for
the 2023 financial year of $67 million (2022: $149 million gain) for the Group and a loss of $75 million (2022: $88 million gain) for
the Company. The cumulative change in fair value of bonds, notes and subordinated debt attributable to changes in credit risk
amounted to a loss of $79 million (2022: $12 million loss) for the Group and a loss of $39 million (2022: $35 million gain) for the
Company. The contractual amount to be paid at the maturity of the bonds, notes and subordinated debt is $14,964 million (2022:
$15,958 million) for the Group and $5,335 million (2022: $5,079 million) for the Company.
188 National Australia Bank
Notes to the financial statements
Note 17
Provision for credit impairment on loans at amortised cost
Accounting policy
The Group applies a three-stage approach to measuring expected credit losses (ECL) for the following categories of
financial assets that are not measured at fair value through profit or loss:
• Debt instruments measured at amortised cost and fair value through other comprehensive income.
•
•
Loan commitments.
Financial guarantee contracts.
Exposures are assessed on a collective basis in each stage unless there is sufficient evidence that one or more events
associated with an exposure could have a detrimental impact on estimated future cash flows. Where such evidence exists,
the exposure is assessed on an individual basis.
Stage
Measurement basis
Performing - 12-month ECL (Stage 1)
Performing - Lifetime ECL (Stage 2)
Non-performing - Lifetime
ECL(Stage 3)
The portion of lifetime ECL associated with the probability of default events
occurring within the next 12 months.
ECL associated with the probability of default events occurring throughout
the life of an instrument.
Lifetime ECL, but interest revenue is measured based on the carrying
amount of the instrument net of the associated ECL.
At each reporting date, the Group assesses the default risk of exposures in comparison to the default risk at initial
recognition, to determine the stage that applies to the associated ECL measurement. If no significant increase in default
risk is observed, the exposure will remain in Stage 1. If the default risk of an exposure has increased significantly since initial
recognition, the exposure will migrate to Stage 2. Should an exposure become non-performing it will migrate to Stage 3.
For this purpose, the Group considers reasonable and supportable information that is relevant and available without undue
cost or effort. This includes quantitative and qualitative information and also forward looking analysis.
ECL are derived from probability-weighted estimates of expected loss, and are measured as follows:
•
•
Financial assets that are performing at the reporting date: as the present value of all cash shortfalls over the expected
life of the financial asset discounted by the effective interest rate. The cash shortfall is the difference between the
cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive.
Financial assets that are non-performing at the reporting date: as the difference between the gross carrying amount
and the present value of estimated future cash flows discounted by the effective interest rate.
• Undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to
the Group if the commitment is drawn down and the cash flows that the Group expects to receive.
•
Financial guarantee contracts: as the expected payments to reimburse the holder less any amounts that the Group
expects to recover.
Credit quality of financial assets
The Group’s internally developed credit rating system utilises historical default data drawn from a number of sources to
assess the potential default risk of lending, or other financial services products, provided to counterparties or customers.
The Group has defined counterparty probabilities of default across retail and non-retail loans and advances, including
performing (pre-default) and non-performing (post-default) rating grades. In assessing for credit impairment of financial
assets under the ECL model, the Group aligns credit impairment with the definition of default prescribed in its Credit Policy
and Procedures.
Assessment of significant increase in credit risk
When determining whether the default risk has increased significantly since initial recognition, the Group considers both
quantitative and qualitative information, including expert credit risk assessment, forward looking information and analysis
based on the Group’s historical default experience.
•
For non-retail facilities, internally derived credit ratings, as described above, represent a key determinant of default
risk. The Group assigns each customer a credit rating at initial recognition based on available information. Credit risk is
deemed to have increased significantly if the credit rating has significantly deteriorated at the reporting date, relative
to the credit rating at the date of initial recognition.
2023 Annual Report
189
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Notes to the financial statements
Note 17 Provision for credit impairment on loans at amortised cost
(cont.)
• Retail facilities use the number of days past due (DPD) or the relative change in probability of default at an account level,
to determine whether or not there has been a significant increase in credit risk.
•
In addition, the Group considers that significant increase in credit risk occurs when a facility is more than 30 DPD.
Definition of default
Default occurs when a loan obligation is contractually 90+ DPD, or when it is considered unlikely that the credit obligation to
the Group will be paid in full without remedial action, such as realisation of security. Exposures which are in default align to
the non-performing exposures definition in APS 220 Credit Risk Management.
Calculation of ECL
• ECL are calculated using three main parameters being probability of default (PD), loss given default (LGD) and exposure
at default (EAD). These parameters are generally derived from internally developed statistical models combined with
historical, current and forward looking information, including macro-economic data.
•
For accounting purposes, the 12-month and lifetime PD represent the expected point-in-time probability of a default
over the next 12 months and remaining expected lifetime of the financial instrument, respectively, based on conditions
existing at the balance sheet date and future economic conditions that affect credit risk.
• The LGD represents expected loss conditional on default, taking into account the mitigating effect of collateral, its
expected value when realised and the time value of money.
• The EAD represents the expected exposure at default, taking into account the repayment of principal and interest from
the balance sheet date to the default event together with any expected drawdown of a facility.
• The 12-month ECL is equal to the discounted sum over the next 12-months of monthly PD multiplied by LGD and EAD.
Lifetime ECL is calculated using the discounted sum of monthly PD over the expected remaining life multiplied by LGD
and EAD.
Incorporation of forward looking information
• The Group uses internal subject matter experts from Risk, Economics and customer divisions to consider a range of
relevant forward looking data, including macro-economic forecasts and assumptions, for the determination of general
economic adjustments and any idiosyncratic or targeted portfolio / industry adjustments, to support the calculation
of ECL.
•
Forward looking provisions for both general macro-economic adjustments (EA) and more targeted portfolio / industry
forward looking adjustments (FLAs), reflect reasonable and supportable forecasts of potential future conditions that
are not captured within the base ECL calculations.
• Macro-economic factors taken into consideration include (but are not limited to) the cash rate, unemployment rates,
GDP growth rates, inflation and residential and commercial property prices, and require an evaluation of both the
current and forecast direction of the macro-economic cycle.
•
Incorporating forward looking information, including macro-economic forecasts, increases the degree of judgement
required to assess how changes in these data points will affect ECL. The methodologies and assumptions, including any
forecasts of future economic conditions, are reviewed regularly.
Critical accounting judgements and estimates
Judgement is applied in determining ECL using objective, reasonable and supportable information about current and
forecast economic conditions. Macro-economic variables used in these scenarios include (but are not limited to)
the cash rate, unemployment rates, GDP growth rates, inflation and residential and commercial property prices. When
determining whether the risk of default has increased significantly since initial recognition, both quantitative and
qualitative information is considered, including expert credit assessment, forward looking information and analysis based
on the Group’s historical loss experience.
190 National Australia Bank
Notes to the financial statements
Note 17 Provision for credit impairment on loans at amortised cost
(cont.)
Credit impairment charge on loans at amortised cost
New and increased provisions (net of collective provision releases)
Write-backs of specific provisions
Recoveries of specific provisions
Total charge to the income statement
Group
Company
2023
$m
1,043
(148)
(79)
816
2022
$m
355
(161)
(70)
124
2023
$m
820
(93)
(73)
654
Stage 1
Stage 2
Stage 3
Performing
12-mth
ECL
Performing
Lifetime
ECL
Non-performing
Lifetime ECL
Collective
provision
Collective
provision
Collective
provision
Specific
provision
Group
Balance at 1 October 2021
Changes due to financial assets recognised in the opening balance
that have:
Transferred to performing - 12-mth ECL - collective provision
Transferred to performing - Lifetime ECL - collective provision
Transferred to non-performing - Lifetime ECL - collective provision
Transferred to non-performing - Lifetime ECL - specific provision
New and increased provisions (net of collective provision releases)
Write-backs of specific provisions
Write-offs from specific provisions
Foreign currency translation and other adjustments(1)
Balance as at 30 September 2022
Changes due to financial assets recognised in the opening balance
that have:
Transferred to performing - 12-mth ECL - collective provision
Transferred to performing - Lifetime ECL - collective provision
Transferred to non-performing - Lifetime ECL - collective provision
Transferred to non-performing - Lifetime ECL - specific provision
New and increased provisions (net of collective provision releases)
Write-backs of specific provisions
Write-offs from specific provisions
Foreign currency translation and other adjustments
$m
256
238
(39)
(1)
-
(42)
-
-
36
448
247
(26)
(1)
-
(143)
-
-
4
$m
3,376
(221)
155
(47)
(25)
22
-
-
16
3,276
(234)
104
(49)
(14)
428
-
-
29
$m
889
(17)
(116)
48
(45)
47
-
-
11
817
(13)
(78)
50
(46)
242
-
-
5
Balance as at 30 September 2023
529
3,540
977
(1)
Includes the impact on provisions of the acquisition of the Citi consumer business.
$m
650
-
-
-
70
328
(161)
(362)
(10)
515
-
-
-
60
516
(148)
(409)
5
539
2022
$m
257
(147)
(62)
48
Total
$m
5,171
-
-
-
-
355
(161)
(362)
53
5,056
-
-
-
-
1,043
(148)
(409)
43
5,585
Impact of movements in gross carrying amount on provision for ECL for the Group
Provision for credit impairment reflects ECL measured using the three-stage approach. The following explains how significant
changes in the gross carrying amount of loans and advances during the 2023 financial year have contributed to the changes in
the provision for credit impairment for the Group under the ECL model.
Overall, the total provision for credit impairment increased by $529 million compared to the balance as at 30 September 2022.
Specific provisions increased by $24 million compared to the balance as at 30 September 2022, mainly due to new and increased
specific provisions in the Business and Private Banking business lending portfolio, partially offset by work-outs for a small number
of larger exposures in the business lending portfolio in Australia and New Zealand.
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2023 Annual Report
191
Notes to the financial statements
Note 17 Provision for credit impairment on loans at amortised cost
(cont.)
Collective provisions increased by $505 million compared to the balance as at 30 September 2022, comprised of:
Collective provision performing – 12-months ECL (Stage 1) increased by $81 million as a result of:
• $149 billion of loans and advances that were newly originated or migrated into Stage 1 from Stage 2 or Stage 3 due to credit
quality improvement.
This was partially offset by:
• $120 billion of loans and advances that were repaid, experienced movement in underlying account balances during the period
or migrated from Stage 1 to Stage 2 or Stage 3 due to deterioration in credit quality.
• A decrease in net forward looking provisions.
Collective provision performing – Lifetime ECL (Stage 2) increased by $264 million as a result of:
• $72 billion of loans and advances that were originated and migrated over the year to Stage 2, including the impact of forward
looking economic information applied in the ECL model or migrating into Stage 2 as a result of loans and advances transferred
from Stage 1 or Stage 3.
This was partially offset by:
• $86 billion of loans and advances that migrated to Stage 1 as a result of improved credit quality or into Stage 3 due to
deterioration in credit quality, were repaid or experienced movement in underlying account balances during the period.
• A decrease in net forward looking provisions.
Collective provision non-performing - Lifetime ECL (Stage 3) increased by $160 million as a result of:
• $5 billion of loans and advances that experienced movement in underlying account balances during the period or were
transferred into Stage 3 from Stage 1 and Stage 2 due to credit quality deterioration.
This was partially offset by:
• $4 billion of loans and advances that were repaid or migrated to Stage 1 or Stage 2 due to credit quality improvement or
migrated to individually credit assessed with specific provisions raised.
• A decrease in net forward looking provisions.
ECL scenario analysis
The Group’s ECL measurement is derived from a probability weighted average of three distinct scenarios (base case, upside
and downside) applied across each of the Group’s major loan portfolios, in addition to FLAs for emerging risk at an industry,
geography or segment level. The probability of each scenario is determined by considering relevant macro-economic outlooks
and their likely impact on the Group’s credit portfolio.
The following table shows the key macro-economic variables for the Australian economy used in the base case and downside
scenarios as at 30 September 2023.
GDP change (year ended September)
Unemployment (as at 30 September)
House price change (year ended September)
Base case
Financial year
Downside
Financial year
2024
2025
2026
2024
2025
2026
%
0.8
4.7
4.1
%
2.0
4.7
3.3
%
2.6
4.5
3.0
%
(1.2)
4.7
%
(2.6)
7.9
(24.5)
(20.3)
%
2.8
9.1
5.5
The following table shows the reported total provisions for ECL based on the probability weighting of scenarios, with the
sensitivity range reflecting the ECL impacts assuming a 100% weighting is applied to the base case scenario or the downside
scenario (with all other assumptions held constant).
Total provisions for ECL
Probability weighted
100% Base case
100% Downside
Group
2023
$m
5,585
4,000
7,546
2022
$m
5,056
4,292
6,008
Applying the average provision coverage ratios by stage, if 1% of the Group's Stage 1 gross loans and advances, contingent
liabilities and credit commitments were included as Stage 2 the provision for ECL as at September 2023 would increase by
$111 million (September 2022: $90 million).
Applying the average provision coverage ratios by stage, if 1% of the Group's Stage 2 gross loans and advances, contingent
liabilities and credit commitments were included as Stage 1 the provision for ECL as at September 2023 would decrease by
$34 million (September 2022: $31 million).
192 National Australia Bank
Notes to the financial statements
Note 17 Provision for credit impairment on loans at amortised cost
(cont.)
The table below shows weightings applied to the Australian portfolio to derive the probability weighted ECL.
Macro-economics scenario weightings
Upside
Base case
Downside
2023
%
2.5
52.5
45.0
2022
%
2.5
52.5
45.0
• The September 2023 provisions for ECL in the 100% base case have decreased since September 2022 primarily due to an
improved economic outlook. This was partially offset by deterioration in asset quality across the Group’s lending portfolio
combined with volume growth and updated methodology in Business and Private Banking.
• The September 2023 provisions for ECL in the 100% downside scenario have increased since September 2022 primarily due
to an increase in the severity of the stress applied in the downside scenario and deterioration in asset quality across the
Group’s lending portfolio combined with volume growth and updated methodology in Business and Private Banking.
• The upside, downside and base case scenario weightings for the Australian portfolio have remained constant compared with
September 2022.
The table below provides a breakdown of the probability weighted ECL by key portfolios:
Total provision for ECL for key portfolios
Housing
Business
Others
Total
Group
2023
$m
1,424
3,744
417
5,585
Stage 1
Stage 2
Stage 3
Performing
12-mth
ECL
Performing
Lifetime
ECL
Non-performing
Lifetime ECL
Collective
provision
Collective
provision
Collective
provision
Specific
provision
Company
Balance at 1 October 2021
Changes due to financial assets recognised in the opening balance
that have:
Transferred to performing - 12-mth ECL - collective provision
Transferred to performing - Lifetime ECL - collective provision
Transferred to non-performing - Lifetime ECL - collective provision
Transferred to non-performing - Lifetime ECL - specific provision
New and increased provisions (net of collective provision releases)
Write-backs of specific provisions
Write-offs from specific provisions
Foreign currency translation and other adjustments(1)
Balance as at 30 September 2022
Changes due to financial assets recognised in the opening balance
that have:
Transferred to performing - 12-mth ECL - collective provision
Transferred to performing - Lifetime ECL - collective provision
Transferred to non-performing - Lifetime ECL - collective provision
Transferred to non-performing - Lifetime ECL - specific provision
New and increased provisions (net of collective provision releases)
Write-backs of specific provisions
Write-offs from specific provisions
Foreign currency translation and other adjustments
$m
203
210
(31)
(1)
-
(39)
-
-
43
385
223
(18)
(1)
-
(135)
-
-
-
$m
2,872
(196)
143
(38)
(23)
(54)
-
-
54
2,758
(212)
88
(42)
(11)
360
-
-
-
$m
806
(14)
(112)
39
(39)
51
-
-
16
747
(11)
(70)
43
(32)
160
-
-
-
Balance as at 30 September 2023
454
2,941
837
(1)
Includes the impact on provisions of the acquisition of the Citi consumer business.
$m
526
-
-
-
62
299
(147)
(294)
(4)
442
-
-
-
43
435
(93)
(367)
1
461
2022
$m
1,296
3,429
331
5,056
Total
$m
4,407
-
-
-
-
257
(147)
(294)
109
4,332
-
-
-
-
820
(93)
(367)
1
4,693
2023 Annual Report
193
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Notes to the financial statements
Note 17 Provision for credit impairment on loans at amortised cost
(cont.)
Impact of movements in gross carrying amount on provision for ECL for the Company
Provision for credit impairment reflects ECL measured using the three-stage approach. The following explains how significant
changes in the gross carrying amount of loans and advances during the 2023 financial year have contributed to the changes in
the provision for credit impairment for the Company under the ECL model.
Overall, the total provision for credit impairment increased by $361 million compared to the balance as at 30 September 2022.
Specific provisions increased by $19 million compared to the balance as at 30 September 2022, mainly due to new and increased
specific provisions in the Business and Private Banking business lending portfolio, partially offset by work-outs for a small number
of larger exposures in the Australian business lending portfolio.
Collective provisions increased by $342 million compared to the balance as at 30 September 2022, comprised of:
Collective provision performing – 12-months ECL (Stage 1) increased by $69 million due to:
• $131 billion of loans and advances that were newly originated or migrated into Stage 1 from Stage 2 or Stage 3 due to credit
quality improvement.
This was partially offset by:
• $105 billion of loans and advances that were repaid, experienced movement in underlying account balances during the period
or migrated from Stage 1 to Stage 2 or Stage 3 due to deterioration in credit quality.
• A decrease in net forward looking provisions.
Collective provision performing – Lifetime ECL (Stage 2) increased by $183 million due to:
• $60 billion of loans and advances that were originated and migrated over the year to Stage 2, including the impact of forward
looking economic information applied in the ECL model or migrating into Stage 2 as a result of loans and advances transferred
from Stage 1 or Stage 3.
This was partially offset by:
• $72 billion of loans and advances that were repaid, experienced movement in underlying account balances during the period,
migrated to Stage 1 as a result of improved credit quality or into Stage 3 due to deterioration in credit quality.
• A decrease in net forward looking provisions.
Collective provision non-performing - Lifetime ECL (Stage 3) increased by $90 million due to:
• $4 billion of existing loans and advances that were transferred into Stage 3 from Stage 1 and Stage 2 due to credit quality
deterioration or experienced movement in underlying account balances during the period.
This was partially offset by:
• $3 billion of loan and advances that were repaid, migrated to Stage 1 or Stage 2 due to credit quality improvement or migrated
to individually credit assessed with specific provisions raised.
• A decrease in net forward looking provisions.
Write-offs still under enforcement activity
The contractual amount outstanding on loans and advances that were written off during the 2023 financial year, which are still
subject to enforcement activity was $9 million (2022: $68 million) for the Group and $8 million (2022: $45 million) for the Company.
Information about gross impaired assets
Stage 3 non-performing exposures include both default but not impaired and gross impaired assets. The following table provides
details on gross impaired assets. Gross amounts are shown before taking into account any collateral held or other credit
enhancements. Refer to Note 19 Financial risk management for analysis of the credit quality of the Group’s loans and advances,
including by provision stage.
Summary of gross impaired assets
Gross impaired assets(1)
Specific provision for credit impairment(2)
Net impaired assets(3)
Group
Company
2023
$m
1,260
(539)
721
2022
$m
1,029
(531)
498
2023
$m
853
(461)
392
2022
$m
878
(442)
436
(1) Gross impaired assets include $nil (2022: $29 million) for the Group and $nil (2022: $nil) for the Company of gross impaired loans at fair value, $10 million (2022: $7 million)
of impaired off-balance sheet credit exposures for the Group and $7 million (2022: $6 million) for the Company.
(2) Specific provision for credit impairment includes $nil (2022: $16 million) for the Group and $nil (2022: $nil) for the Company of fair value credit adjustments on loans at
fair value.
(3) The fair value of security in respect of impaired assets is $498 million (2022: $499 million) for the Group and $433 million (2022: $444 million) for the Company. Fair value
amounts of security held in excess of the outstanding balance of individual impaired assets are not included in these amounts.
194 National Australia Bank
Notes to the financial statements
Note 18
Derivatives and hedge accounting
Accounting policy
Trading derivatives
Trading derivatives are not in a qualifying hedging relationship and are measured at fair value through profit or loss.
Hedge accounting
The Group utilises the following types of hedge relationships in managing its exposure to risk. At inception of all hedge relationships the Group documents the relationship between
the hedging instrument and hedged item, the risk being hedged, the Group’s risk management objective and strategy and how effectiveness will be measured throughout the
hedge relationship.
Objective
Methods for testing hedge effectiveness
Potential sources of ineffectiveness
Recognition of effective hedge portion
Recognition of ineffective hedge portion
Hedging instrument expires, is sold, or
when hedging criteria are no longer met
Cost of hedging reserve
Cash flow hedge
Fair value hedge
To hedge changes to cash flows arising from interest rate and
foreign currency risk.
Critical terms matching, regression analysis or cumulative
dollar offset.
Primarily mismatches in terms of the hedged item and the
hedging instrument.
Discounting basis between the hedged item and
hedging instrument.
Fair value changes of the hedging instrument associated with
the hedged risk are recognised in the cash flow hedge reserve
in equity.
To hedge fair value changes to recognised assets and
liabilities arising from interest rate and foreign currency risk.
Critical terms matching or cumulative dollar offset.
Primarily mismatches in terms of the hedged item and the
hedging instrument, prepayment risk and reset risk.
Discounting basis between the hedged item and
hedging instrument.
Fair value changes of the hedging instrument and those arising
from the hedged risk on the hedged item are recognised in the
income statement.
Recognised in the income statement as ineffectiveness arises.
Transferred to the income statement as / when the hedged
item affects the income statement. If the hedged item is no
longer expected to occur the effective portion accumulated in
equity is transferred to the income statement immediately.
For qualifying hedging instruments, the Group excludes foreign currency basis spreads from hedge designations. Any change
in the fair value of these hedging instruments for changes in cross currency basis spreads is deferred to the cost of hedging
reserve and released to profit or loss either when the hedged exposure affects profit or loss or on a systematic basis over the life
of the hedge. The cumulative movements are expected to be nil by maturity of the hedging instruments.
Cumulative hedge adjustment to the hedged item is amortised
to the income statement on an effective yield basis.
2023 Annual Report
195
Notes to the financial statements
Note 18 Derivatives and hedge accounting (cont.)
Derivative assets and liabilities
The tables below set out total derivative assets and liabilities disclosed as trading and hedging derivatives.
Total derivatives
Trading derivatives
Hedging derivatives
Total derivatives
Trading derivatives
Foreign exchange rate-related contracts
Spot and forward contracts
Cross currency swaps
Options / swaptions
Total foreign exchange rate-related contracts
Interest rate-related contracts
Swaps
Options / swaptions
Total interest rate-related contracts
Credit derivatives
Commodity derivatives
Other derivatives
Total trading derivatives
196 National Australia Bank
Group
Company
Assets
Liabilities
Assets
Liabilities
2023
$m
30,770
3,499
34,269
2022
$m
53,429
7,587
61,016
2023
$m
31,122
4,511
35,633
2022
$m
50,729
6,757
57,486
2023
$m
31,079
2,705
33,784
2022
$m
54,932
5,719
60,651
2023
$m
33,587
2,523
36,110
Group
Company
Assets
Liabilities
Assets
Liabilities
2023
$m
11,514
8,656
138
20,308
8,710
1,148
9,858
146
453
5
2022
$m
26,167
15,825
427
42,419
8,444
1,045
9,489
234
1,268
19
2023
$m
10,284
7,969
133
18,386
10,671
1,393
12,064
134
533
5
30,770
53,429
31,122
2022
$m
21,887
14,418
400
36,705
10,903
1,356
12,259
157
1,592
16
50,729
2023
$m
11,209
10,545
136
21,890
7,429
1,148
8,577
146
461
5
2022
$m
24,668
19,941
431
45,040
7,320
1,045
8,365
234
1,274
19
2023
$m
10,022
11,446
133
21,601
9,919
1,389
11,308
134
541
3
31,079
54,932
33,587
2022
$m
53,397
4,097
57,494
2022
$m
20,612
19,076
400
40,088
10,184
1,352
11,536
157
1,600
16
53,397
Notes to the financial statements
Note 18 Derivatives and hedge accounting (cont.)
Risk management strategy for hedge accounting
Overview
The Group’s hedging strategy is to manage its exposure to interest rate risk on a net variable basis in Australian or New Zealand dollars. For Australian and New Zealand denominated
exposures the Group will enter into interest rate swaps where the exposure is to a fixed interest rate. In some instances, cash flow hedges of interest rate risk are also used to arrive at a
net variable rate position. Foreign currency exposures are swapped to Australian or New Zealand dollars using cross-currency swaps and interest rate swaps. The material risks and the risk
management strategy are explained further below.
Cash flow hedges – interest rate risk
The Group manages interest rate risk exposure on deposits and loans via interest rate derivatives. The Group accounts for these hedge relationships as a macro cash flow hedge. The gross
exposures are allocated to time buckets based on expected repricing dates, with interest rate derivatives allocated to hedge accordingly. The benchmark interest rate is hedged which
represents the largest component of changes in fair value and is observable in relevant financial markets.
Cash flow hedges – foreign currency risk
The Group is exposed to foreign currency risk on credit margin cash flows and foreign currency risk on the principal cash flows, both of which arise from foreign currency debt issuances.
The Group uses foreign currency derivatives to manage changes between the foreign currency and Australian and New Zealand dollars for the above mentioned cash flows.
Fair value hedges – interest rate risk
Interest rate risk arises on fixed rate bonds, notes and subordinated debt issuances, fixed rate debt instruments held for liquidity purposes and fixed rate loans and advances. The Group
hedges its interest rate risk on these instruments with relevant interest rate derivatives to reduce its exposure to changes in fair value due to interest rate fluctuations.
Hedging relationships are predominantly one-to-one, with the exception of fixed rate housing loans which were previously designated on a macro basis until de-designation in the 2022
financial year.
With all the fair value hedges, the benchmark interest rate is hedged which represents the largest component of changes in fair value and is observable in relevant financial markets.
2023 Annual Report
197
Notes to the financial statements
Note 18 Derivatives and hedge accounting (cont.)
Hedging derivatives
Hedging derivative assets and liabilities are disclosed by the hedged risk and type of hedge relationship in which they are designated. The Group may designate separate derivatives to
hedge different risk components of one hedged item. In such scenario the notional amount of hedging derivatives will, in sum, exceed the notional amount of the hedged item. In the case of
cross-currency swaps, the Group can designate a single instrument to hedge both interest rate risk in a fair value hedge and currency risk in a cash flow hedge.
Hedging instrument
Risk
$m
$m
$m
$m
$m
$m
$m
$m
Group
Company
2023
2022
2023
2022
Carrying
amount
Notional
Carrying
amount
Notional
Carrying
amount
Notional
Carrying
amount
Notional
Derivative assets
Cash flow hedges
Cash flow hedges
Cash flow hedges
Fair value hedges
Interest rate swaps
Cross-currency swaps
Foreign exchange contracts
Interest rate swaps
Interest
Currency
Currency
Interest
Fair value and cash flow hedges
Cross-currency swaps
Interest and currency
Cash flow hedges
Total derivative assets
Derivative liabilities
Cash flow hedges
Cash flow hedges
Cash flow hedges
Fair value hedges
Futures(1)
Interest
Interest rate swaps
Cross-currency swaps
Foreign exchange contracts
Interest rate swaps
Interest
Currency
Currency
Interest
Fair value and cash flow hedges
Cross-currency swaps
Interest and currency
Cash flow hedges(2)
Total derivative liabilities
Futures(1)
Interest
(1) Futures notional amounts are netted for presentation purposes.
(2) Comparative information has been restated to align to the presentation in the current period.
-
177,400
-
160,449
-
159,050
-
144,670
3,370
90,389
7,340
119,820
2,576
70,629
98
28
1
2
7,908
67,540
21
1,866
212
19
16
-
6,257
75,768
475
59
98
28
1
2
7,908
65,635
21
1,866
5,493
212
11
3
-
93,038
6,257
73,012
167
59
3,499
345,124
7,587
362,828
2,705
305,109
5,719
317,203
3
165,627
5
206,451
3
152,929
5
201,808
2,580
151
425
1,352
-
94,734
15,864
108,249
6,773
465
4,152
64,945
1,844
1
383
2,209
7
506
108,169
8,589
1,128
151
290
235
-
56,839
15,864
81,548
1,934
465
3,513
49,626
1
279
292
7
506
90,448
2,612
1,128
4,511
391,712
6,757
389,788
2,523
309,579
4,097
346,128
198 National Australia Bank
Notes to the financial statements
Note 18 Derivatives and hedge accounting (cont.)
The following table shows the maturity profile of hedging instruments based on their notional amounts.
Group
Interest rate swaps
Foreign exchange contracts
Futures(1)(2)
Cross-currency swaps - interest and currency
Cross-currency swaps - currency
Company
Interest rate swaps
Foreign exchange contracts
Futures(1)
Cross-currency swaps - interest and currency
Cross-currency swaps - currency
2023
2022
0 to 12
months
$m
235,775
23,714
1,681
744
28,518
220,232
23,714
1,681
404
26,676
1 to 5 years
Over 5 years
$m
$m
229,751
53,290
58
650
5,746
120,530
-
-
304
36,075
191,754
47,176
58
650
1,247
75,784
-
-
304
25,008
Total
$m
518,816
23,772
2,331
6,794
185,123
459,162
23,772
2,331
1,955
127,468
0 to 12
months
$m
1 to 5 years
Over 5 years
$m
$m
Total
$m
247,746
245,893
57,198
550,837
6,622
892
3,178
37,059
141
295
5,144
104,868
-
-
742
42,838
6,763
1,187
9,064
184,765
241,175
216,746
52,017
509,938
6,622
892
1,358
33,441
141
295
982
75,627
-
-
439
33,596
6,763
1,187
2,779
142,664
(1) Futures notional amounts are netted for presentation purposes.
(2) Comparative information has been restated to align to the presentation in the current period.
2023 Annual Report
199
Notes to the financial statements
Note 18 Derivatives and hedge accounting (cont.)
The average rate for major currencies of the final exchange of cross-currency swaps designated in hedge accounting relationships is as follows:
USD:AUD
EUR:AUD
GBP:AUD
USD:NZD
CHF:NZD
EUR:NZD
Group
Company
2023
1.416
1.514
1.867
1.488
1.554
1.715
2022
1.362
1.497
1.868
1.458
1.554
1.683
2023
1.412
1.546
1.861
n/a
n/a
n/a
2022
1.361
1.551
1.863
n/a
n/a
n/a
The average executed rate for interest rate swaps in hedge accounting relationships for major currencies is as follows:
NZD interest rates
USD interest rates
AUD interest rates
EUR interest rates
Group
Company
2023
2022
2023
2022
Fair value
hedges
%
Cash flow
hedges
%
Fair value
hedges
%
Cash flow
hedges
%
1.95 to 3.05
0.04 to 7.30
1.95 to 4.50
(0.01) to 4.87
0.61 to 4.85
-
0.61 to 2.96
-
Fair value
hedges
%
1.95 to 3.05
0.61 to 2.73
Cash flow
hedges
%
-
-
Fair value
hedges
%
1.95 to 3.05
0.61 to 2.73
Cash flow
hedges
%
-
-
0.40 to 4.37
0.06 to 7.02
0.40 to 7.13
0.06 to 7.29
0.40 to 3.99
0.06 to 7.02
0.40 to 7.13
0.06 to 7.29
(0.22) to 3.71
-
(0.22) to 2.61
-
(0.22) to 2.61
-
(0.22) to 2.61
-
200 National Australia Bank
Notes to the financial statements
Note 18 Derivatives and hedge accounting (cont.)
Hedged items
The balance of the cash flow hedge reserve, which represents the effective portion of the movements in the hedging instrument, is presented in Note 29 Reserves. The movements in
hedging instruments recognised in other comprehensive income are reported in the Group’s Statement of other comprehensive income. As at 30 September, the amounts recognised in the
cash flow hedge reserve for which hedge accounting is no longer applied is a loss of $11 million (2022: loss of $14 million).
The following table shows the carrying amount of fair value hedged items in hedge relationships, and the accumulated amount of fair value hedge adjustments in these carrying amounts. The
Group does not hedge its entire exposure to a class of financial instruments, therefore the carrying amounts below do not equal the total carrying amounts disclosed in other notes.
Group
Company
2023
2022
2023
2022
Carrying
amount
$m
22,872
(13)
763
46,451
22,969
13,128
Fair value
hedge
adjustments
$m
-
(13)
(54)
(2,876)
(1,463)
(2,906)
Carrying
amount
$m
19,075
(26)
984
41,765
18,126
11,887
Fair value
hedge
adjustments
$m
-
(26)
(55)
(2,698)
(1,219)
(2,464)
Carrying
amount
$m
22,872
-
763
40,033
-
13,128
Fair value
hedge
adjustments
$m
Carrying
amount
$m
-
-
(54)
(2,348)
-
(2,906)
19,075
-
984
36,730
-
11,887
Fair value
hedge
adjustments
$m
-
-
(55)
(2,204)
-
(2,464)
Debt instruments(1)
Semi-government bonds, notes
and securities
Loans and advances
Housing loans(2)
Other term lending
Bonds, notes and
subordinated debt
Medium-term notes
Covered bonds(3)
Subordinated medium-term notes
(1) The carrying amount of debt instruments at fair value through other comprehensive income does not include a fair value hedge adjustment as the hedged asset is measured at fair value. The accounting for the hedge relationship results in a transfer
from other comprehensive income to the income statement.
(2) On 1 April 2022, BNZ discontinued portfolio fair value hedge accounting for its housing loans. The carrying amount represents the accumulated unamortised portion of the fair value hedge adjustment which will be amortised to profit or loss over the
remaining term of the loans. The amount that has ceased to be adjusted for hedging gains and losses is a loss of $13 million (2022: loss of $26 million) for the Group and $nil (2022: $nil) for the Company.
(3) The Company does not apply hedge accounting to covered bonds, however these are designated for hedge accounting purposes at the Group level.
2023 Annual Report
201
Notes to the financial statements
Note 18 Derivatives and hedge accounting (cont.)
Hedge ineffectiveness
Fair value and cash flow hedge relationships result in the following changes in value used as the basis for recognising hedge
ineffectiveness for the years ended 30 September:
Change in fair value on
hedging instruments
Change in fair value on
hedged items
Group
Fair value hedges (interest rate risk)
(1,660)
2023
$m
Cash flow hedges (interest rate risk)
Cash flow hedges (currency risk)
Fair value and Cash flow hedges
(interest rate and currency risk)
Total
Company
Fair value hedges (interest rate risk)
Cash flow hedges (interest rate risk)
Cash flow hedges (currency risk)
Total
151
3,065
21
1,577
(1,488)
352
1,502
366
2022
$m
(4,259)
(2,748)
2,836
(73)
(4,244)
(1,966)
(3,004)
2,701
(2,269)
2023
$m
1,610
(149)
(3,038)
(21)
(1,598)
1,439
(352)
(1,480)
(393)
2022
$m
4,286
2,749
(2,806)
73
4,302
1,970
3,004
(2,674)
2,300
Hedge ineffectiveness
recognised in
income statement
2023
$m
2022
$m
(50)
2
27
-
(21)
(49)
-
22
(27)
27
1
30
-
58
4
-
27
31
Group
Company
2023
$m
2022
$m
2023
$m
2022
$m
Cash flow hedge (interest rate risk)
Cash flow hedges - gains / (losses) recognised in other comprehensive income(1)
(292)
(2,509)
(357)
(2,804)
Amount reclassified from the cash flow hedge reserve to income statement(1)
427
(205)
711
(200)
(1) Comparative information has been restated to align to the disclosure in the current period.
Cash flow hedge (currency risk)
Cash flow hedges - gains / (losses) recognised in other comprehensive income
3,034
2,787
1,480
2,674
Amount reclassified from the cash flow hedge reserve to income statement
(3,103)
(2,583)
(1,531)
(2,483)
Group
Company
2023
$m
2022
$m
2023
$m
2022
$m
202 National Australia Bank
Notes to the financial statements
Note 19
Financial risk management
Overview of Risk Management Framework
Risk is the potential for harm and an inherent part of the Group's business. The Group's ability to manage risk effectively is critical
to being a safe and secure bank that can serve customers well and help our communities prosper. The Group's risk management
is in line with APRA Prudential Standard CPS 220 Risk Management.
The Group's Risk Management Framework (RMF) consists of systems, structures, policies, processes and people within the
Group that manage the Group's material risks. The RMF is comprehensively reviewed every three years for appropriateness,
effectiveness and adequacy by an operationally independent party. The Board is ultimately responsible for the Risk Management
Framework and oversees its operation by management. In addition, directors and senior executives are held accountable for the
parts of the Group’s operations they manage or control.
The Group applies a 'Three Lines of Accountability' operating model in relation to the management of risk. The overarching
principle of the model is that risk management capability must be embedded within the business to be effective. The role of each
line is:
•
First Line - Businesses own risks and obligations, and the controls and mitigation strategies that help manage them.
• Second Line - A functionally segregated Risk function develops risk management frameworks, defines risk boundaries,
provides objective review and challenge regarding the effectiveness of risk management within the first line businesses,
and executes specific risk management activities where a functional segregation of duties and/or specific risk capability
is required.
• Third Line - An independent Internal Audit function reporting to the Board monitors the end-to-end effectiveness of risk
management and compliance with the RMF.
Further risk management information for the Group is disclosed in the Corporate Governance section of the Group’s website at
nab.com.au/about-us/corporate-governance.
Credit risk
Credit risk overview, management and control responsibilities
Credit is any transaction that creates an actual or potential obligation for a counterparty or a customer to pay the Group. Credit
risk is the potential that a counterparty or customer will fail to meet its obligations to the Group in accordance with the agreed
terms. Lending activities account for most of the Group’s credit risk, however other sources of credit risk also exist throughout
the activities of the Group. These activities include the trading book, and other financial instruments and loans (including, but not
limited to, acceptances, placements, inter-bank transactions, trade financing, foreign exchange transactions, swaps, bonds and
options), as well as in the extension of commitments and guarantees and the settlement of transactions.
The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to existing
or potential counterparties or customers, groups of related counterparties or groups of related customers, and to geographical
and industry segments. Such risks are monitored on an ongoing basis and are subject to annual or more frequent review.
In general, the Group does not take possession of collateral it holds as security or call on other credit enhancements that would
result in recognition of an asset on the balance sheet.
Exposure to credit risk is managed through regular analysis of the ability of existing or potential counterparties, customers,
groups of related counterparties or groups of related customers to meet repayment obligations, primarily interest and principal,
and by changing credit limits where appropriate. Exposure to credit risk is also managed in part, by obtaining collateral and
corporate and personal guarantees.
The Group further restricts its exposure to credit losses by entering into master netting arrangements for derivatives,
repurchase and securities lending transactions with counterparties with which it undertakes a significant volume of
transactions. The credit risk associated with contracts favourable to a Group entity is reduced by a master netting arrangement
to the extent that if a counterparty failed to meet its obligations in accordance with agreed terms, all contracts with a
counterparty can be terminated and settled on a net basis.
ESG risks
The Group is exposed to ESG and other emerging risks. The following items are examples of how these risks may impact
the Group:
•
Increases in the frequency and severity of climatic events could impact customers’ ability to service their loans or the value
of the collateral held to secure the loans.
• Action taken by governments, regulators and society more generally, to transition to a low-carbon economy, could impact
the ability of some customers to generate long-term returns in a sustainable way or lead to certain assets being stranded in
the future.
•
•
Failure to comply with environmental and social legislation (emerging and current) may impact customers’ ability to generate
sustainable returns and service their loans.
If in future customers don’t hold appropriate levels of insurance for physical assets against certain risks, this may impact the
value the Group can recover in the event of certain natural disasters.
The Group considers these risks as part of the credit risk assessment and due diligence process before relevant customers
are granted credit and for new product development. The Group also manages its total credit portfolio within established risk
appetite and limits, particularly for specific industries or regions that are more exposed to these types of risks. In addition, the
Group may recognise FLAs to the provision for credit impairment for the impact of adverse climate events. In the 2022 financial
year, the Group recognised a FLA of $14 million for the potential impact of the Lismore floods (2023: nil).
2023 Annual Report
203
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Notes to the financial statements
Note 19 Financial risk management (cont.)
Maximum exposure to credit risk
For financial assets recognised on the balance sheet, the maximum exposure to credit risk is the carrying amount. In certain
circumstances, there may be differences between the carrying amounts reported on the balance sheet and the amounts
reported in the tables below. Principally, these differences arise in respect of financial assets that are subject to risks other
than credit risk, such as equity instruments which are primarily subject to market risk, or bank notes and coins.
For financial guarantees granted, the maximum exposure to credit risk is the maximum amount that the Group would have to
pay if the guarantees are called upon. For irrevocable loan commitments and other credit-related commitments, the maximum
exposure to credit risk is the full amount of committed facilities.
The table below shows the Group’s maximum exposure to credit risk for on-balance sheet and off-balance sheet positions
before taking into account any collateral held or other credit enhancements.
Financial assets
Cash and liquid assets
Due from other banks
Collateral placed
Trading assets
Debt instruments
Other financial assets
Derivative assets
Gross loans and advances
Due from controlled entities
Other assets
Total
Bank guarantees and letters of credit
Credit commitments
Total
Total credit risk exposure
Footnote
(a)
(b)
(c)
(d)
(e)
(f)
(d)
(f)
(g)
(g)
(h)
(h)
Group
Company
2023
$m
23,669
117,306
11,286
101,168
46,357
1,430
34,269
2022
$m
55,304
141,861
13,115
40,573
42,080
2,061
61,016
707,228
685,839
-
6,869
-
4,861
1,049,582
1,046,710
26,321
208,853
235,174
25,683
201,147
226,830
2023
$m
23,022
106,955
10,214
90,417
46,336
1,708
33,784
611,556
43,577
6,572
974,141
24,637
188,268
212,905
2022
$m
55,100
133,144
10,636
34,043
42,094
2,749
60,651
597,445
38,226
4,181
978,269
23,958
182,667
206,625
1,284,756
1,273,540
1,187,046
1,184,894
(a) The balance of Cash and liquid assets that is exposed to credit risk is comprised primarily of reverse repurchase
agreements and securities borrowing agreements.
(b) The balance of Due from other banks that is exposed to credit risk is comprised primarily of securities borrowing
agreements and reverse repurchase agreements, as well as balances held with central supervisory banks and other interest
earning assets. Securities borrowing agreements and reverse repurchase agreements are collateralised with highly liquid
securities and the collateral is in excess of the borrowed or loaned amount.
Balances held with central supervisory banks and other interest earning assets that are due from other banks are managed
based on the counterparty’s creditworthiness. The Group will utilise master netting arrangements where possible to reduce
its exposure to credit risk.
(c) The maximum exposure to credit risk from Collateral placed is the collateral placed with the counterparty before
consideration of any netting arrangements.
(d) At any one time, the maximum exposure to credit risk from Trading assets and Derivative assets is limited to the current
fair value of instruments that are favourable to the Group less collateral obtained. This credit risk is managed as part of the
overall lending limits with customers, together with potential exposures from market movements.
The Group uses documentation including International Swaps and Derivatives Association (ISDA) Master Agreements to
document derivative activities. Under ISDA Master Agreements, if a default of a counterparty occurs, all contracts with the
counterparty are terminated. They are then settled on a net basis at market levels current at the time of default. The Group
also executes Credit Support Annexes in conjunction with ISDA Master Agreements.
Credit risk from over-the-counter trading and hedging derivatives is mitigated where possible through netting arrangements
whereby derivative assets and liabilities with the same counterparty can be offset in certain circumstances. Derivatives that
are cleared through a central clearing counterparty or an exchange have less credit risk than over-the-counter derivatives
and are subject to relevant netting and collateral agreements.
Collateral is obtained against derivative assets, depending on the creditworthiness of the counterparty and / or the nature of
the transaction.
(e) Debt instruments are generally comprised of government, semi-government, corporate and financial institution bonds,
notes and securities. The amount of collateral held against such instruments will depend on the counterparty and the nature
of the specific financial instrument.
The Group may utilise credit default swaps, guarantees provided by central banks, other forms of credit enhancements or
collateral to minimise the Group’s exposure to credit risk.
204 National Australia Bank
Notes to the financial statements
Note 19 Financial risk management (cont.)
(f) Gross loans and advances and Other financial assets primarily comprise general lending and line of credit products. The
distinction is due to accounting classification and measurement. These lending products will generally have a significant level
of collateralisation depending on the nature of the product.
Other lending to non-retail customers may be provided on an unsecured basis or secured (partially or fully) by acceptable
collateral defined in specific Group credit policy and business unit procedures. Collateral is generally comprised of business
assets, inventories and in some cases personal assets of the borrower. The Group manages its exposure to these products
by completing a credit evaluation to assess the customer’s character, industry, business model and capacity to meet their
commitments without distress. Collateral provides a secondary source of repayment for funds advanced in the event that
a customer cannot meet their contractual repayment obligations. For amounts due from customers on acceptances the
Group generally has recourse to guarantees, underlying inventories or other assets in the event of default which significantly
mitigates the credit risk associated with accepting the customer’s credit facility with a third party.
Housing loans are secured against residential property as collateral and, where applicable, Lenders Mortgage Insurance (LMI)
is obtained by the Group (mostly in Australia) to cover any shortfall in outstanding loan principal and accrued interest. LMI
is generally obtained for residential mortgages with a Loan to Valuation Ratio (LVR) in excess of 80%. The financial effect of
these measures is that remaining credit risk on residential mortgage loans is minimal. Other retail lending products are mostly
unsecured (e.g. credit card outstandings and other personal lending).
(g) The balance of Other assets which is exposed to credit risk includes securities sold not delivered, interest receivable
accruals and other receivables. Interest receivable accruals are subject to the same collateral as the underlying borrowings.
Other receivables will mostly be unsecured. There are typically no collateral or other credit enhancements obtained in
respect of amounts Due from controlled entities.
(h) Bank guarantees and letters of credit are comprised primarily of guarantees to customers, standby or documentary letters
of credit and performance related contingencies. The Group will typically have recourse to specific assets pledged as
collateral in the event of a default by a party for which the Group has guaranteed its obligations to a third party and therefore
tend to carry the same credit risk as loans.
Credit commitments represent binding commitments to extend credit where the Group is potentially exposed to loss of an
amount equal to the total unused commitments. However, the likely amount of loss is generally less than the total unused
commitments, as most commitments to extend credit are contingent upon customers maintaining specific credit standards.
The Group monitors the term to maturity of credit commitments because, in general, longer-term commitments have a
greater degree of credit risk than shorter term commitments.
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2023 Annual Report
205
Notes to the financial statements
Note 19 Financial risk management (cont.)
Offsetting financial assets and liabilities
The tables below present the amounts of financial instruments that have been offset on the balance sheet, as well as those
amounts that are subject to enforceable master netting arrangements or similar agreements. The tables exclude financial
instruments that are not subject to offsetting arrangements but are instead only subject to collateral arrangements.
The ‘Net amounts’ presented in the tables are not intended to represent the Group’s actual exposure to credit risk. The Group
utilises a wide range of strategies to mitigate credit risk in addition to netting and collateral arrangements, including placing
limits on the amount of risk accepted in relation to counterparties, customers, groups of related counterparties or customers
and geographical and industry segments.
The amounts recognised on the balance sheet are presented in the 'Total balance sheet amount' column in the tables
below, and comprise the sum of the 'Net amount reported on balance sheet' and 'Amounts not subject to enforceable
netting arrangements'.
2023
Subject to enforceable netting arrangements
Amounts offset on
balance sheet
Amounts not offset on balance sheet
Net
amount
reported
on
balance
sheet
Gross
amount
Amount
offset
Financial
Instruments
Non-
cash
collateral
Cash
collateral
Net
Amount
Amounts
not
subject to
enforceable
netting
arrangements
Total
balance
sheet
amount
Group
$m
$m
$m
$m
$m
$m
$m
$m
$m
Derivative assets(1)
157,389 (127,890)
29,499
(14,611)
(362)
(10,164)
4,362
4,770
34,269
Reverse repurchase agreements
95,197 (14,542)
80,655
Loans and advances
5,748
(5,705)
43
-
-
(80,655)
-
-
-
-
43
-
80,655
708,428 708,471
Total assets
258,334 (148,137) 110,197
(14,611)
(81,017)
(10,164)
4,405
713,198 823,395
Derivative liabilities(1)
(154,459) 127,891
(26,568)
14,611
210
9,171
(2,576)
(9,065) (35,633)
Repurchase agreements
(88,674) 14,542
(74,132)
Deposits and other borrowings
(9,122)
5,705
(3,417)
-
-
74,132
-
-
-
-
-
(74,132)
(3,417)
(681,034) (684,451)
Total liabilities
(252,255) 148,138 (104,117)
14,611
74,342
9,171
(5,993)
(690,099) (794,216)
Company
Derivative assets(1)
143,179 (114,623)
28,556
(12,808)
(83)
(8,822)
6,843
5,228
33,784
Reverse repurchase agreements
91,333 (14,166)
77,167
Loans and advances
4,203
(4,191)
12
-
-
(77,167)
-
-
-
-
12
-
77,167
612,226 612,238
Total assets
238,715 (132,980) 105,735
(12,808)
(77,250)
(8,822)
6,855
617,454 723,189
Derivative liabilities(1)
(141,028) 114,624
(26,404)
12,808
210
8,701
(4,685)
(9,706) (36,110)
Repurchase agreements
(81,339) 14,166
(67,173)
Deposits and other borrowings
(6,163)
4,191
(1,972)
-
-
67,173
-
-
-
-
-
(67,173)
(1,972)
(606,669) (608,641)
Total liabilities
(228,530) 132,981
(95,549)
12,808
67,383
8,701
(6,657)
(616,375) (711,924)
(1) As at 30 September 2023, the amount offset for derivative assets includes $9,495 million (Company: $8,377 million) of cash collateral netting and the amount offset for
derivative liabilities includes $4,828 million (Company: $4,758 million) of cash collateral netting.
206 National Australia Bank
Notes to the financial statements
Note 19 Financial risk management (cont.)
2022
Subject to enforceable netting arrangements
Amounts offset on
balance sheet
Amounts not offset on balance sheet
Net
amount
reported
on
balance
sheet
Gross
amount
Amount
offset
Financial
Instruments
Non-
cash
collateral
Cash
collateral
Net
Amount
Amounts
not
subject to
enforceable
netting
arrangements
Total
balance
sheet
amount
Group
$m
$m
$m
$m
$m
$m
$m
$m
$m
Derivative assets(1)
171,721 (117,807)
53,914
(33,670)
(956)
(15,053)
4,235
7,102
61,016
Reverse
repurchase agreements(2)
95,371
(18,831)
76,540
Loans and advances(2)
1,399
(1,344)
55
-
-
(76,540)
-
-
-
-
55
-
76,540
687,660 687,715
Total assets
268,491 (137,982)
130,509
(33,670)
(77,496)
(15,053)
4,290
694,762 825,271
Derivative liabilities(1)
(165,410) 117,807
(47,603)
33,670
503
7,655
(5,775)
(9,883)
(57,486)
Repurchase agreements(2)
(104,094)
18,831
(85,263)
Deposits and other borrowings(2)
(6,906)
1,344
(5,562)
-
-
85,263
-
-
-
-
-
(85,263)
(5,562)
(681,443) (687,005)
Total liabilities
(276,410) 137,982
(138,428)
33,670
85,766
7,655
(11,337)
(691,326) (829,754)
Company
Derivative assets(1)
160,532 (106,481)
54,051
(34,420)
(814)
(13,299)
5,518
6,600
60,651
Reverse
repurchase agreements(2)
95,092
(18,831)
76,261
Loans and advances(2)
582
(556)
26
-
-
(76,261)
-
-
-
-
26
-
76,261
598,724 598,750
Total assets
256,206 (125,868)
130,338
(34,420)
(77,075)
(13,299)
5,544
605,324 735,662
Derivative liabilities(1)
(154,789) 106,481
(48,308)
34,420
503
6,115
(7,270)
(9,186)
(57,494)
Repurchase agreements(2)
(100,922)
18,831
(82,091)
Deposits and other borrowings(2)
(4,959)
556
(4,403)
-
-
82,091
-
-
-
-
-
(82,091)
(4,403)
(612,558) (616,961)
Total liabilities
(260,670) 125,868
(134,802)
34,420
82,594
6,115
(11,673)
(621,744) (756,546)
(1) As at 30 September 2022, the amount offset for derivative assets includes $7,663 million (Company: $6,667 million) of cash collateral netting and the amount offset for
derivative liabilities includes $4,097 million (Company: $3,994 million) of cash collateral netting.
(2) Comparative information has been restated to align to the presentation in the current period.
Derivative assets and derivative liabilities
Derivative assets and derivative liabilities are only offset on the balance sheet where the Group has a legally enforceable right
to offset in all circumstances and there is an intention to settle the asset and liability on a net basis, or to realise the asset and
settle the liability simultaneously. The Group has applied offsetting to certain centrally cleared derivatives and their associated
collateral amounts which satisfy the AASB 132 Financial Instruments: Presentation requirements.
Reverse repurchase and repurchase agreements
Reverse repurchase and repurchase agreements will typically be subject to Global Master Repurchase Agreements or similar
agreements whereby all outstanding transactions with the same counterparty can only be offset and closed out upon a default
or insolvency event. In some instances, the agreement provides the Group with a legally enforceable right to offset in all
circumstances. In such a case and where there is an intention to settle the asset and liability on a net basis, or to realise the
asset and settle the liability simultaneously, the amounts with that counterparty are offset on the balance sheet.
Where the Group has a right to offset on default or insolvency only, the related non-cash collateral amounts comprise highly
liquid securities, either obtained or pledged, which can be realised in the event of a default or insolvency by one of the
counterparties. The value of such securities obtained or pledged must at least equate to the value of the exposure to the
counterparty, therefore the net exposure is considered to be nil.
Loans and advances, deposits and other borrowings
The amounts offset for loans and advances and deposits and other borrowings represent amounts subject to set-off
agreements that satisfy the AASB 132 requirements. The 'Net amounts reported on balance sheet' are included within ‘Overdrafts’
in Note 12 Loans and Advances and ‘On-demand and short-term deposits’ and ‘Deposits not bearing interest’ in Note 13 Deposits
and other borrowings. The 'Amounts not subject to enforceable netting arrangements' represent all other loans and advances
and deposits and other borrowings of the Group, including those measured at fair value.
2023 Annual Report
207
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Notes to the financial statements
Note 19 Financial risk management (cont.)
Credit risk exposure by risk grade
The following tables show the credit quality of credit risk exposures to which the expected credit loss model is applied, for both
recognised and unrecognised financial assets, based on the following risk grades:
• Senior investment grade: broadly corresponds with Standard & Poor’s ratings of AAA to A- (internal rating 1 to 5).
•
Investment grade: broadly corresponds with Standard & Poor’s ratings of BBB+ to BBB- (internal rating 6 to 11).
• Sub-investment grade: broadly corresponds with Standard & Poor’s ratings of BB+ (internal rating 12 to 23).
• Default: broadly corresponds with Standard & Poor’s rating of D (internal rating 98 and 99).
Notional stage allocations (Stage 1 and Stage 2) for credit risk exposures incorporate the impact of forward looking economic
information applied in the expected credit loss model. Refer Accounting Policy section of Note 17 Provision for credit impairment
on loans at amortised cost for further details.
Stage 1
Performing
2023
$m
2022
$m
124,634
277,097
126,373
-
127,878
270,812
99,753
-
Stage 2
Performing
2023
$m
2,356
27,385
2022
$m
4,376
33,614
141,747
143,291
Stage 3
Total
Non-performing
2023
$m
2022
$m
-
-
-
-
-
-
2023
$m
2022
$m
126,990
304,482
268,120
7,636
132,254
304,426
243,044
6,115
-
-
7,636
6,115
528,104
498,443
171,488
181,281
7,636
6,115
707,228
685,839
88,046
75,102
25,753
-
85,149
70,260
18,517
-
3,442
12,832
29,643
-
4,196
15,775
32,577
-
188,901
173,926
45,917
52,548
-
-
-
356
356
-
-
-
356
356
91,488
87,934
55,396
356
89,345
86,035
51,094
356
235,174
226,830
717,005
672,369
217,405
233,829
7,992
6,471
942,402
912,669
Group
Gross loans and advances
Senior investment grade
Investment grade
Sub-investment grade
Default
Total gross loans
and advances
Contingent liabilities and
credit commitments
Senior investment grade
Investment grade
Sub-investment grade
Default
Total contingent liabilities
and credit commitments
Total gross loans
and advances,
contingent liabilities and
credit commitments
Debt instruments
Senior investment grade
46,357
41,644
Investment grade
Sub-investment grade
Default
-
-
-
436
-
-
Total debt instruments
46,357
42,080
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46,357
41,644
-
-
-
436
-
-
46,357
42,080
208 National Australia Bank
Notes to the financial statements
Note 19 Financial risk management (cont.)
Stage 1
Performing
2023
$m
2022
$m
88,177
255,873
114,773
-
96,635
250,467
89,083
-
Stage 2
Performing
2023
$m
1,257
22,003
2022
$m
2,842
26,761
122,956
126,225
Stage 3
Total
Non-performing
2023
$m
2022
$m
-
-
-
-
-
-
2023
$m
2022
$m
89,434
277,876
237,729
6,517
99,477
277,228
215,308
5,432
-
-
6,517
5,432
458,823
436,185
146,216
155,828
6,517
5,432
611,556
597,445
82,623
68,954
22,744
-
80,614
65,389
16,103
-
2,484
10,087
25,665
-
3,326
12,291
28,553
-
174,321
162,106
38,236
44,170
-
-
-
348
348
-
-
-
349
349
85,107
79,041
48,409
348
83,940
77,680
44,656
349
212,905
206,625
633,144
598,291
184,452
199,998
6,865
5,781
824,461
804,070
Company
Gross loans and advances
Senior investment grade
Investment grade
Sub-investment grade
Default
Total gross loans
and advances
Contingent liabilities and
credit commitments
Senior investment grade
Investment grade
Sub-investment grade
Default
Total contingent liabilities
and credit commitments
Total gross loans
and advances,
contingent liabilities and
credit commitments
Debt instruments
Senior investment grade
46,336
41,658
Investment grade
Sub-investment grade
Default
-
-
-
436
-
-
Total debt instruments
46,336
42,094
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46,336
41,658
-
-
-
436
-
-
46,336
42,094
Concentration of exposure
Concentration of credit risk exists when a number of counterparties are engaged in similar activities, or operate in the same
geographical areas or industry sectors and have similar economic characteristics so that their ability to meet contractual
obligations is similarly affected by changes in economic, political or other conditions.
The diversification and size of the Group is such that its lending is widely spread both geographically and in terms of the types of
industries it serves.
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2023 Annual Report
209
Notes to the financial statements
Note 19 Financial risk management (cont.)
Industry concentration of financial assets
Net loans
and advances(1)
Other
financial assets(2)
Contingent
liabilities and
credit commitments
Total
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
702,886
682,659
174,949
197,056
235,174
226,830
1,113,009
1,106,545
2,101
1,771
11,438
10,483
14,112
13,280
70,024
64,798
8,754
12,660
7,109
49,722
2,884
8,313
18,594
68,943
12,699
9,246
7,187
12,850
8,023
14,168
6,306
48,952
3,769
7,373
18,062
66,554
12,124
8,471
5,919
12,058
28,020
83,399
15,609
26,525
83,316
14,083
225,226
257,230
35,709
21,696
30,755
35,336
19,870
29,159
480,302
460,537
33,378
24,908
18,162
34,383
32,509
23,985
16,106
32,608
1,955
1,630
10,058
9,187
11,963
11,290
53,605
49,389
7,851
11,196
6,118
47,114
2,224
6,374
16,460
65,403
10,695
7,738
6,612
11,202
7,273
12,439
5,382
47,325
3,122
5,713
15,926
63,186
10,442
7,138
5,270
10,489
25,491
74,809
13,190
24,302
74,146
12,033
209,126
241,718
34,964
16,563
27,654
34,615
15,275
26,169
422,693
408,397
27,333
21,652
16,544
30,273
27,163
21,029
14,658
28,836
Group
Accommodation and hospitality
9,337
8,712
Agriculture, forestry, fishing
& mining
55,912
51,518
Business services and
property services
Commercial property
Construction
Financial & insurance
Government & public authorities
Manufacturing
Personal
19,266
70,739
8,500
38,456
1,820
13,383
12,161
18,502
69,148
7,777
46,554
2,794
12,497
11,097
-
-
-
-
-
-
-
-
-
-
137,048
161,724
31,005
28,773
-
-
-
-
Residential mortgages
404,870
387,817
6,489
6,166
20,679
15,662
10,818
21,283
20,385
15,514
9,984
20,360
-
-
157
250
-
-
203
190
Retail and wholesale trade
Transport and storage
Utilities
Other
Total
Company
Accommodation and hospitality
8,103
7,557
Agriculture, forestry, fishing
& mining
41,642
38,099
Business services and
property services
Commercial property
Construction
Financial & insurance
Government & public authorities
Manufacturing
Personal
17,640
63,613
7,072
36,369
1,753
10,189
11,194
17,029
61,707
6,651
43,821
2,734
9,562
10,243
-
-
-
-
-
-
-
-
-
-
125,643
150,572
30,987
28,759
-
-
-
-
Residential mortgages
350,823
339,061
6,467
6,150
Retail and wholesale trade
Transport and storage
Utilities
Other
Total
16,638
13,914
9,775
18,820
16,721
13,891
9,185
18,157
-
-
157
251
-
-
203
190
(1) Net loans and advances includes loans at fair value.
(2) Other financial assets represents amounts due from other banks, debt instruments and collateral placed.
210 National Australia Bank
607,545
594,418
163,505
185,874
212,905
206,625
983,955
986,917
Notes to the financial statements
Note 19 Financial risk management (cont.)
Geographic concentration of financial assets
Australia
New Zealand
Other International
2023
$m
4,345
92,378
8,709
65,086
35,377
869
24,329
588,961
6,110
826,164
4,259
92,371
8,701
65,086
35,378
869
26,247
588,288
6,255
827,454
2022
$m
15,567
112,767
9,401
34,025
31,449
1,355
47,115
571,773
4,836
828,288
15,464
112,765
9,401
34,025
31,479
1,354
50,953
571,074
4,877
831,392
2023
$m
36
10,140
1,030
7,782
-
561
2,720
94,206
764
2022
$m
46
8,580
2,479
6,530
-
570
4,882
87,006
938
2023
$m
19,288
14,788
1,547
28,300
10,980
-
7,220
19,535
1,321
2022
$m
39,691
20,514
1,235
18
10,631
136
9,019
21,655
554
117,239
111,031
102,979
103,453
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,763
14,584
1,513
25,331
10,958
839
7,537
19,396
1,300
39,636
20,379
1,235
18
10,615
1,395
9,698
21,605
551
100,221
105,132
Group
Cash and liquid assets
Due from other banks
Collateral placed
Trading assets
Debt instruments
Other financial assets
Derivative assets
Loans and advances
Other assets
Total
Company
Cash and liquid assets
Due from other banks
Collateral placed
Trading assets
Debt instruments
Other financial assets
Derivative assets
Loans and advances
Other assets
Total
Market risk
Market risk overview and management
Market risk primarily stems from the Group’s trading and balance sheet management activities, the impact of changes and
correlation between interest rates, foreign exchange rates, credit spreads and volatility in bond, commodity or equity prices.
Market risk is represented by the below two categories:
Traded Market Risk
Non-Traded Market Risk
Traded Market Risk is the potential for gains or losses to arise
from trading activities undertaken by the Group as a result of
movements in market prices. The trading activities of the Group
are principally carried out by Corporate and Institutional Banking.
Trading activities represent dealings that encompass both
active management of market risk and supporting client sales
businesses. The types of market risk arising from these activities
include interest rate, foreign exchange, commodity, equity price,
credit spread and volatility risk.
The Group has exposure to non-traded market risk, primarily
Interest Rate Risk in the Banking Book (IRRBB). IRRBB is the risk
that the Group’s earnings or economic value will be affected or
reduced by changes in interest rates. The sources of IRRBB are
as follows:
•
•
•
Repricing risk, arising from changes to the overall level of
interest rates and inherent mismatches in the repricing term
of banking book items.
Yield curve risk, arising from a change in the relative level of
interest rates for different tenors and changes in the slope or
shape of the yield curve.
Basis risk, arising from differences between the actual and
expected interest margins on banking book items over the
implied cost of funds of those items.
• Optionality risk, arising from the existence of stand-alone or
embedded options in banking book items, to the extent that
the potential for those losses is not included in the above risks.
Measurement of market risk
The Group primarily manages and controls market risk using Value at Risk (VaR), which is a standard measure used throughout the
industry. VaR gauges the Group’s possible loss for the holding period based on historical market movements. VaR is measured
at a 99% confidence interval. This means that there is a 99% chance that the loss will not exceed the VaR estimate during the
holding period.
The Group employs other risk measures to supplement VaR, with appropriate limits to manage and control risks, and
communicate the specific nature of market exposures to management, the Board Risk & Compliance Committee and ultimately
the Board. These supplementary measures include stress testing, stop loss, position and sensitivity limits.
2023 Annual Report
211
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Notes to the financial statements
Note 19 Financial risk management (cont.)
Traded market risk
The VaR methodology involves multiple revaluations of the trading books using 550 days of historical pricing shifts. The pricing data is rolled daily.
The use of VaR methodology has limitations, which include:
• The historical data used to calculate VaR is not always an appropriate proxy for current market conditions. If market volatility or correlation conditions change significantly, losses may
occur more frequently and to a greater magnitude than the VaR measure suggests.
• VaR methodology assumes that positions are held for one day and may underestimate losses on positions that cannot be hedged or reversed inside that timeframe.
• VaR is calculated on positions at the close of each trading day, and does not measure risk on intra-day positions.
• VaR does not describe the directional bias or size of the positions generating the risk.
The table below shows the Group and Company VaR for the trading portfolio, including both physical and derivative positions:
Group
Company
As at
30 September
Average value
Minimum value
Maximum
value
As at
30 September
Average value
Minimum value
Maximum
value
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
Value at Risk at a 99%
confidence level
Foreign exchange risk
Interest rate risk
Volatility risk
Commodities risk
Credit risk
Inflation risk
3.3
6.7
1.8
1.0
2.0
2.3
2.4
5.4
2.3
1.6
1.2
1.7
2.7
8.4
1.8
1.4
1.8
2.4
3.0
8.9
2.9
1.6
1.8
2.2
1.0
5.3
0.9
0.9
0.9
1.6
1.3
5.2
2.0
0.5
0.9
1.4
Diversification benefit
(7.1)
(7.5)
(7.8)
(9.1)
n/a
n/a
Total Diversified VaR at 99%
confidence interval
Other market risks
Total
10.0
2.3
12.3
7.1
3.4
10.5
10.7
1.9
12.6
11.3
4.5
15.8
7.2
0.6
7.8
7.1
1.0
8.1
5.7
17.8
2.7
2.9
3.2
3.4
n/a
20.3
3.2
23.5
5.8
14.1
6.4
2.9
3.4
3.4
n/a
18.7
8.4
27.1
3.7
6.1
1.8
1.0
1.8
2.3
2.3
5.2
2.3
1.6
1.0
1.7
2.2
7.5
1.8
1.4
1.5
2.4
2.7
7.6
2.9
1.6
1.4
2.0
0.8
5.1
0.9
0.9
0.7
1.6
1.3
4.5
2.0
0.5
0.7
1.4
(6.7)
(7.2)
(7.2)
(8.1)
n/a
n/a
10.0
2.3
12.3
6.9
3.4
10.3
9.6
1.9
11.5
10.1
4.5
14.6
6.8
0.6
7.4
6.5
1.0
7.5
5.0
17.4
2.8
2.9
2.9
3.4
n/a
17.5
3.2
20.7
5.4
12.3
6.4
2.9
2.9
3.2
n/a
17.0
8.4
25.4
212 National Australia Bank
Notes to the financial statements
Note 19 Financial risk management (cont.)
Non-traded market risk - Balance sheet risk management
The principal objective of balance sheet risk management is to maintain acceptable levels of interest rate and liquidity risk to mitigate the negative impact of movements in interest rates on
the earnings and market value of the Group’s banking book, while ensuring the Group maintains sufficient liquidity to meet its obligations as they fall due.
Non-traded market risk – Interest rate risk management
IRRBB is measured, monitored, and managed from both an internal management and regulatory perspective. The Risk Management Framework incorporates both market valuation and
earnings based approaches in accordance with the IRRBB Policy and Prudential Practice Guides. Risk measurement techniques include VaR, Earnings at Risk (EaR), interest rate risk stress
testing, repricing analysis, cash flow analysis and scenario analysis. The IRRBB regulatory capital calculation incorporates repricing, yield curve, basis, and optionality risk, embedded gains /
losses and any inter-risk and / or inter-currency diversification. The Group has been accredited by APRA to use its internal model for the measurement of IRRBB.
Key features of the internal interest rate risk management model include:
• Historical simulation approach utilising instantaneous interest rate shocks.
• Static balance sheet (i.e. any new business is assumed to be matched, hedged or subject to immediate repricing).
• VaR and EaR are measured on a consistent basis.
• 99% confidence level.
• Three month holding period.
• EaR utilises a 12 month forecast period.
• At least six years of business day historical data (updated daily).
•
•
Investment term for capital is modelled with an established benchmark term of between one and five years.
Investment term for core non-interest bearing assets and liabilities is modelled on a behavioural basis with a term that is consistent with sound statistical analysis.
The following table shows the Group and the Company aggregate VaR and EaR for the IRRBB:
Group
Company
As at
30 September
2023
$m
2022
$m
Average value
Minimum value
Maximum value
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
As at
30 September
2023
$m
2022
$m
Average value
Minimum value
Maximum value
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
Value at Risk
Australia
New Zealand
Other International
Earnings at Risk(1)
Australia
New Zealand
Other International
379.1
300.5
375.1
307.3
315.0
289.0
407.9
326.4
379.1
300.5
375.1
307.3
315.0
289.0
407.9
326.4
33.6
34.6
59.1
9.6
-
25.5
47.9
29.6
18.4
-
31.6
44.0
55.3
15.0
-
31.6
37.1
24.3
18.8
-
24.1
27.0
38.2
7.8
-
22.5
30.8
14.0
10.0
-
36.7
62.8
73.3
22.7
0.1
39.4
47.9
50.7
28.1
-
-
34.6
-
47.9
-
44.0
-
37.1
-
27.0
-
30.8
-
62.8
-
47.9
59.1
29.6
55.3
24.3
38.2
14.0
73.3
50.7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) EaR amounts calculated under the IRRBB model include Australian banking and other overseas banking subsidiary books, however excludes offshore branches.
Residual value risk
As part of its normal lending activities, the Group takes residual value risk on assets such as industrial, mining, rail, aircraft, marine, technology, healthcare and other equipment. This exposes
the Group to a potential fall in prices of these assets below the outstanding residual exposure at the facility expiry.
2023 Annual Report
213
Notes to the financial statements
Note 19 Financial risk management (cont.)
Liquidity risk and funding mix
Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its financial obligations as they fall due. These obligations include the
repayment of deposits on demand or at their contractual maturity, the repayment of wholesale borrowings and loan capital as
they mature and the payment of interest on borrowings.
These risks are governed by the Group’s funding and liquidity risk appetite which is set by the Board. Group Treasury is
responsible for the management of these risks. Objective review and challenge of the effectiveness of risk management is
provided by Group Balance Sheet and Liquidity Risk Management with oversight by the Group Asset and Liability Committee. The
Board has the ultimate responsibility to monitor and review the adequacy of the Group’s funding and liquidity RMF and the Group’s
compliance with risk appetite.
Key principles adopted in the Group’s approach to managing liquidity risk include:
• Monitoring the Group’s liquidity position on a daily basis, using a combination of contractual and behavioural modelling of
balance sheet and cash flow information.
• Maintaining a HQLA portfolio which supports intra-day operations and may be sold in times of market stress.
• Operating a prudent funding strategy which ensures appropriate diversification and limits maturity concentrations. The Group
undertakes a conservative approach by imposing internal limits that are in addition to regulatory requirements.
• Maintaining a contingent funding plan designed to respond to an accelerated outflow of funds from the Group.
• Requiring the Group to have the ability to meet a range of survival horizon scenarios, including name-specific and general
liquidity stress scenarios.
The Group maintained funding and liquidity metrics well above regulatory minimums throughout the 2023 financial year. The CLF
has been fully phased out to zero on 1 January 2023.
The liquid asset portfolio held as part of these principles is well diversified by currency, counterparty and product type with the
mix consistent with the liquidity risks of the Group. The composition of the portfolio includes cash, government securities and
highly rated investment grade paper. The market value of total on-balance sheet liquid assets held as at 30 September 2023
was $222,463 million (2022: $220,415 million). In addition, the Group holds internal RMBS as a source of contingent liquidity. As at
30 September 2023, the cash value of unencumbered internal RMBS held and available was $80,089 million (2022: $66,114 million).
Funding mix
The Group’s funding is comprised of a mix of deposits, term wholesale funding, short-term wholesale funding and equity. The
Group manages this within risk appetite settings to ensure suitable funding of its asset base and to enable it to respond to
changing market conditions and regulatory requirements.
The Group maintains a strong focus on stable deposits both from a growth and quality perspective and continues to utilise
deposits as a key funding source for funded assets.
The Group supplements deposit-raising via its term funding programmes, raising $40,254 million(1) of term wholesale funding in the
2023 financial year (2022: $38,676 million). The weighted average maturity of term wholesale funding issued by the Group was 4.3(2)
years to first call (2022: 5.0(2) years). In addition, during the 2023 financial year, the Group continued to access international and
domestic short-term wholesale markets.
On 19 March 2020, the RBA announced the establishment of the TFF for the Australian banking system to support ADIs in providing
credit into the economy. The TFF provided access to three-year secured funding, supporting lending to the Group's customers
and reducing wholesale funding refinancing risks at the time. The total available TFF allocation of $31,866 million (excluding the
TFF acquired via the Citi consumer business acquisition) was drawn, consisting of $14,270 million of Initial Allowance in the 2020
financial year and $17,596 million of Additional and Supplementary Allowances in the 2021 financial year. As at 30 September
2023, the full Initial Allowance amount has been repaid. The Additional and Supplementary Allowances are due to mature by
30 June 2024.
Contractual maturity of assets and liabilities
The following tables show an analysis of contractual maturities of assets and liabilities at the reporting date. The Group expects
that certain assets and liabilities will be recovered or settled at maturities which are different to their contractual maturities,
including deposits where the Group expects as part of normal banking operations that a large proportion of these balances will
roll over.
Includes FLP.
(1)
(2) Excludes AT1 capital, Residential Mortgage Backed Securities (RMBS), TFF and FLP.
214 National Australia Bank
Notes to the financial statements
Note 19 Financial risk management (cont.)
Less than 12 months
2023
$m
2022
$m
Greater than
12 months
2023
$m
2022
$m
No specific maturity
Total
2023
$m
2022
$m
2023
$m
2022
$m
Group
Assets
Cash and liquid assets
Due from other banks
Collateral placed
Trading assets
Debt instruments
Other financial assets
Derivative assets
24,699
116,984
11,286
66,717
6,505
858
236
56,451
141,530
13,115
13,948
7,081
966
1,379
-
322
-
34,434
39,852
572
3,263
-
331
-
26,524
34,999
1,095
6,208
Loans and advances
130,430
117,119
562,744
554,631
All other assets
Total assets
Liabilities
Due to other banks
Collateral received
Other financial liabilities
Derivative liabilities
Deposits and
other borrowings
Bonds, notes and
subordinated debt
Debt issues
All other liabilities
Total liabilities
7,429
5,418
97
347
365,144
357,007
641,284
624,135
37,200
10,672
52,386
985
55,140
17,245
8,941
1,528
2,316
19,539
-
13,966
3,526
-
14,345
5,229
631,645
654,090
50,475
29,436
20,848
26,080
114,797
93,203
-
12,726
-
8,266
-
-
4,456
2,213
766,462
771,290
189,536
163,965
Net (liabilities) / assets
(401,318)
(414,283)
451,748
460,170
23,959
106,634
10,214
61,684
6,499
1,147
571
108,016
6,472
56,121
132,813
10,636
11,044
7,092
405
1,311
96,689
4,357
-
321
-
28,716
39,837
561
2,134
-
331
-
22,898
35,002
2,344
4,408
491,059
488,174
609
643
Company
Assets
Cash and liquid assets
Due from other banks
Collateral placed
Trading assets
Debt instruments
Other financial assets
Derivative assets
Loans and advances
All other assets
Total assets
Liabilities
Due to other banks
Collateral received
Other financial liabilities
Derivative liabilities
Deposits and
other borrowings
Bonds, notes and
subordinated debt
Debt issues
All other liabilities
Total liabilities
325,196
320,468
563,237
553,800
101,348
113,560
989,781
987,828
33,965
9,281
42,512
957
51,635
15,365
2,340
1,021
-
-
9,233
1,566
17,660
-
6,620
3,076
-
-
-
-
-
-
33,587
53,397
560,238
589,160
48,403
27,801
20,587
25,995
103,742
83,679
-
11,567
-
6,670
-
-
3,324
1,745
679,107
692,186
166,268
140,581
-
-
7,318
44,218
-
-
8,561
45,735
87,883
13,465
Net (liabilities) / assets
(353,911)
(371,718)
396,969
413,219
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-
-
30,770
9,528
12,340
52,655
-
-
-
-
-
-
-
-
53,429
8,684
11,770
73,984
-
-
-
31,122
50,729
-
-
8,561
1,899
41,582
11,073
-
-
-
17
-
-
31,079
8,609
61,643
-
-
7,318
2,792
60,839
13,145
-
-
-
101
-
-
54,932
7,816
50,711
101
101,168
24,699
56,451
117,306
141,861
11,286
46,357
1,430
34,269
13,115
40,573
42,080
2,061
61,016
702,702
680,434
19,866
17,535
1,059,083
1,055,126
39,516
10,672
66,352
35,633
74,679
17,245
23,286
57,486
682,120
683,526
135,645
119,283
8,561
19,081
7,318
13,271
997,580
996,094
61,503
59,032
23,959
56,121
106,955
133,144
10,214
90,417
46,336
1,708
33,784
10,636
34,043
42,094
2,749
60,651
607,684
592,679
68,724
55,711
33,965
9,281
51,745
36,110
69,295
15,365
8,960
57,494
608,641
616,961
124,329
109,674
8,561
60,626
7,318
52,633
104,933
933,258
937,700
8,627
56,523
50,128
2023 Annual Report
215
Notes to the financial statements
Note 20
Fair value of financial instruments
Accounting policy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Where the classification of a financial asset or liability results in it being
measured at fair value, wherever possible, the fair value is determined with reference to the quoted bid or offer price in
the most advantageous active market to which the Group has immediate access. An adjustment for credit risk (CVA) is also
incorporated into the fair value as appropriate as well as an adjustment for funding costs (FVA) related to uncollateralised
over-the-counter derivatives. The fair value measurement technique of each class of instrument is described below.
Instrument
Fair value measurement technique
Loans and advances
Deposits and
other borrowings
Bonds, notes and
subordinated debt
and debt issues
Derivatives
Trading assets and
debt instruments
Equity instruments
Other financial
assets and liabilities
Due to controlled
entities and
due from
controlled entities
The fair value of loans and advances that are priced based on a variable rate with no
contractual repricing tenor is assumed to equate to the carrying value. The fair value of
all other loans and advances is calculated using discounted cash flow models based on the
maturity of the loans and advances. The discount rates applied are based on interest rates
at the reporting date for similar types of loans and advances, if the loans and advances were
performing at the reporting date.
The fair value of deposits and other borrowings that are non-interest bearing or at call,
is assumed to equate to the carrying value. The fair value of other deposits and other
borrowings is calculated using discounted cash flow models based on the deposit type
and maturity.
The fair values of bonds, notes and subordinated debt and debt issues are calculated based
on a discounted cash flow model using a yield curve appropriate to the remaining maturity of
the instruments and appropriate credit spreads, or in some instances are calculated based
on market quoted prices when there is sufficient liquidity in the market.
The fair values of trading and hedging derivative assets and liabilities are obtained from
quoted closing market prices at the reporting date, discounted cash flow models or option
pricing models as appropriate.
The fair values of trading assets and debt instruments are based on quoted closing market
prices at the reporting date. Where securities are unlisted and quoted market prices are
not available, the Group obtains the fair value by means of discounted cash flows and other
valuation techniques that are commonly used by market participants. These techniques
address factors such as interest rates, credit risk and liquidity.
The fair value of equity instruments at fair value through other comprehensive income is
estimated on the basis of the actual and forecasted financial position and results of the
underlying assets or net assets taking into consideration their risk profile.
The fair values of other financial assets and liabilities are based on quoted closing market
prices and data or valuation techniques, appropriate to the nature and type of the
underlying instrument.
Includes reverse repurchase agreements and repurchase agreements that are classified as
held for trading and measured at fair value through profit and loss. The fair values are based
on a discounted cash flow model using an appropriate yield curve.
The carrying amounts of cash and liquid assets, due from and to other banks, other assets, other liabilities and amounts
due from and to controlled entities, approximate their fair value as they are short-term in nature or are receivable or
payable on demand.
Guarantees, letters of credit, performance related contingencies and credit related commitments are generally not sold
or traded and estimated fair values are not readily ascertainable. The fair value of these items are not calculated, as very
few of the commitments extending beyond six months would commit the Group to a predetermined rate of interest, and
the fees attaching to these commitments are the same as those currently charged for similar arrangements.
Fair value for a net open position is the offer price for a financial liability and the bid price for a financial asset, multiplied by
the number of units of the instrument issued or held.
Transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the reporting period
in which the transfer occurs.
Critical accounting judgements and estimates
A significant portion of financial instruments are carried on the balance sheet at fair value.
Where no active market exists for a particular asset or liability, the Group uses a valuation technique to arrive at the fair
value, including the use of transaction prices obtained in recent arm’s length transactions, discounted cash flow analysis,
option pricing models and other valuation techniques, based on market conditions and risks existing at the reporting date.
In doing so, fair value is estimated using a valuation technique that makes maximum use of observable market inputs and
places minimal reliance upon entity-specific inputs.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price (i.e. the fair value
of the consideration given or received) unless the fair value of that instrument is evidenced by comparison with other
observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on a
valuation technique whose variables include only data from observable markets. When such evidence exists, the Group
recognises the difference between the transaction price and the fair value in profit or loss on initial recognition (i.e. on
day one).
216 National Australia Bank
Notes to the financial statements
Note 20 Fair value of financial instruments (cont.)
Fair value hierarchy
The level in the fair value hierarchy within which a fair value measurement is categorised is determined on the basis of the lowest
level input that is significant to the fair value measurement in its entirety. The fair value hierarchy is as follows:
•
•
•
Level 1 – Financial instruments that have been valued by reference to unadjusted quoted prices for identical financial assets
or financial liabilities in active markets. Financial instruments included in this category are Commonwealth of Australia and New
Zealand government bonds, and spot and exchange traded derivatives.
Level 2 – Financial instruments that have been valued through valuation techniques incorporating inputs other than quoted
prices within Level 1 that are observable for the financial asset or financial liability, either directly (as prices) or indirectly
(derived from prices). Financial instruments included in this category are over-the-counter trading and hedging derivatives,
semi-government bonds, financial institution and corporate bonds, mortgage-backed securities, loans measured at fair
value, and issued bonds, notes and subordinated debt measured at fair value.
Level 3 – Financial instruments that have been valued through valuation techniques incorporating inputs that are not based
on observable market data. Unobservable inputs are those not readily available in an active market due to market illiquidity or
complexity of the product. Financial instruments included in this category are bespoke trading derivatives, trading derivatives
where the credit valuation adjustment is considered unobservable and significant to the valuation, and certain asset-backed
securities valued using unobservable inputs.
Transfers into and out of Level 3 take place when there are changes to the inputs in the valuation technique. Where inputs are no
longer observable the fair value measurement is transferred into Level 3. Conversely, a measurement is transferred out of Level 3
when inputs become observable.
The Group’s exposure to fair value measurements based in full or in part on unobservable inputs is restricted to a small number
of financial instruments, which comprise an insignificant component of the portfolios in which they belong. As such, a change in
the assumption used to value the instruments as at 30 September 2023 attributable to reasonably possible alternatives would
not have a material effect.
Fair value of financial instruments, carried at amortised cost
The financial assets and financial liabilities listed in the table below are carried at amortised cost. While this is the value at which
the Group expects the assets to be realised and the liabilities to be settled, the table below includes their fair values as at
30 September:
2023
2022
Carrying
value
Level
1
Level
2
Level
3
Fair
value
Carrying
value
Level
1
Level
2
Level
3
Fair
value
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
-
-
5,530 693,672 699,202
5,530 693,672 699,202
-
-
4,744 670,807 675,551
4,744 670,807 675,551
Debt issues
8,561
7,802
1,040
7,318
6,466
1,065
Total financial liabilities
826,326
7,802 820,302
7 828,111
810,127
6,466 803,012
- 683,857
- 135,405
- 683,857
7 135,412
-
8,842
- 683,530
- 118,417
- 683,530
- 118,417
-
7,531
- 809,478
Group
Financial assets
Loans and advances
Total financial assets
Financial liabilities
Deposits and other borrowings
Bonds, notes and subordinated debt
702,702
702,702
682,120
135,645
Company
Financial assets
Loans and advances
Total financial assets
Financial liabilities
Deposits and other borrowings
Bonds, notes and subordinated debt
607,684
607,684
608,641
124,329
-
-
3,414 602,221 605,635
3,414 602,221 605,635
-
-
2,811 586,399 589,210
2,811 586,399 589,210
Debt issues
8,561
7,802
1,040
Total financial liabilities
741,531
7,802 734,366
- 610,438
- 122,888
- 610,438
- 122,888
-
8,842
- 742,168
- 617,073
- 107,792
7,318
6,466
1,065
733,953
6,466 725,930
- 617,073
- 107,792
-
7,531
- 732,396
680,434
680,434
683,526
119,283
592,679
592,679
616,961
109,674
2023 Annual Report
217
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Notes to the financial statements
Note 20 Fair value of financial instruments (cont.)
Fair value measurements recognised on the balance sheet
Group
Financial assets
Trading assets
Debt instruments
Other financial assets
Derivative assets
Equity instruments(1)
2023
2022
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$m
$m
$m
$m
$m
$m
$m
$m
30,482
70,686
- 101,168
2,691
43,377
-
-
-
1,243
33,946
-
289
187
323
257
46,357
1,430
34,269
257
27,393
3,625
-
-
-
13,180
37,732
1,740
60,567
-
-
40,573
723
321
449
187
42,080
2,061
61,016
187
Total financial assets measured at fair value
33,173
149,252
1,056 183,481
31,018
113,219
1,680
145,917
Financial liabilities
Other financial liabilities
Derivative liabilities
5,453
60,899
-
66,352
-
35,362
271
35,633
Total financial liabilities measured at fair value
5,453
96,261
271 101,985
2,441
-
2,441
20,845
57,117
77,962
-
23,286
369
369
57,486
80,772
Company
Financial assets
Trading assets
Debt instruments
Other financial assets
Derivative assets
Equity instruments(1)
Due from controlled entities
27,935
62,482
-
90,417
24,303
9,740
-
34,043
2,691
43,356
-
-
-
-
1,521
33,461
-
1,238
289
187
323
122
46,336
1,708
33,784
122
-
1,238
3,626
37,745
-
-
-
-
2,428
60,202
-
-
723
321
449
86
-
42,094
2,749
60,651
86
-
Total financial assets measured at fair value
30,626
142,058
921 173,605
27,929
110,115
1,579
139,623
Financial liabilities
Other financial liabilities
Derivative liabilities
Due to controlled entities
5,254
46,491
-
51,745
2,198
-
-
35,839
1,159
271
36,110
-
1,159
-
-
6,762
57,125
-
-
8,960
369
57,494
-
-
Total financial liabilities measured at fair value
5,254
83,489
271
89,014
2,198
63,887
369
66,454
(1)
Includes fair value through profit or loss instruments.
There were no material transfers between Level 1 and Level 2 during the 2023 financial year for the Group and the Company.
218 National Australia Bank
Notes to the financial statements
Note 20 Fair value of financial instruments (cont.)
The table below summarises changes in fair value classified as Level 3:
Derivatives
Debt instruments
Other(1)
Assets
Liabilities
Derivatives
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
Group
Balance at the beginning of year
449
148
723
919
508
369
369
96
Gains / (losses) on assets and (gains) /
losses on liabilities recognised:
In profit or loss(2)
In other comprehensive income(2)
Purchases and issues
Sales and settlements
Transfers into Level 3
Transfers out of Level 3
Foreign currency translation adjustments
Balance at end of year
Gains / (losses) on assets and (gains) /
losses on liabilities for the reporting period
related to financial instruments held at the
end of the reporting period recognised:
(20)
-
25
-
20
(153)
2
323
245
-
72
-
5
77
(13)
(237)
-
(1)
(2)
449
72
(351)
-
289
-
(15)
386
(380)
250
(438)
1
723
7
17
59
(50)
12
461
(112)
(280)
-
(49)
14
444
-
-
(4)
508
(18)
-
-
-
-
(81)
1
271
253
-
20
-
1
-
(1)
369
In profit or loss(2)
In other comprehensive income(2)
(20)
-
245
-
-
5
-
(15)
7
17
(50)
12
(18)
-
253
-
Company
Balance at the beginning of year
449
148
723
919
407
285
369
96
Gains / (losses) on assets and (gains) /
losses on liabilities recognised:
In profit or loss(2)
In other comprehensive income(2)
Purchases and issues
Sales and settlements
Transfers into Level 3
Transfers out of Level 3
Foreign currency translation adjustments
Balance at end of year
Gains / (losses) on assets and (gains) /
losses on liabilities for the reporting period
related to financial instruments held at the
end of the reporting period recognised:
(20)
-
25
-
20
(153)
2
323
245
-
72
-
5
77
(13)
(237)
-
(1)
(2)
449
72
(351)
-
289
-
(15)
386
(380)
250
(438)
1
723
7
16
20
(50)
(4)
419
(105)
(242)
-
(49)
13
309
-
-
(1)
407
(18)
-
-
-
-
(81)
1
271
253
-
20
-
1
-
(1)
369
In profit or loss(2)
In other comprehensive income(2)
(20)
-
245
-
-
5
-
(15)
7
16
(50)
(4)
(18)
-
253
-
Includes other financial assets and equity instruments.
(1)
(2) Comparative information has been restated to align to the presentation in the current period.
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2023 Annual Report
219
Notes to the financial statements
Note 21
Financial asset transfers
The Group and the Company enter into transactions by which they transfer financial assets to counterparties or to structured entities. Financial assets that do not qualify for derecognition
are typically associated with repurchase agreements, covered bonds and securitisation program agreements. The following table sets out the carrying amount of financial assets that did
not qualify for derecognition and their associated liabilities. Where relevant, the table also sets out the net position of the fair value of financial assets where the counterparty to the
associated liabilities has recourse only to the transferred assets.
Group
Company
Repurchase
agreements
Covered bonds
Securitisation
Repurchase
agreements
Covered bonds
Securitisation(1)(2)
2023
$m
44,955
40,282
n/a
n/a
n/a
2022
$m
60,136
54,005
n/a
n/a
n/a
2023
$m
40,508
33,617
n/a
n/a
n/a
2022
$m
35,343
26,874
n/a
n/a
n/a
2023
$m
2,545
2,545
2,532
2,541
(9)
2022
$m
3,477
3,477
3,452
3,452
-
2023
$m
39,401
35,646
n/a
n/a
n/a
2022
$m
56,327
50,823
n/a
n/a
n/a
2023
$m
33,439
27,701
n/a
n/a
n/a
2022
$m
29,742
22,298
n/a
n/a
n/a
2023
$m
2,738
2,738
2,729
2,706
23
2022
$m
3,757
3,757
3,735
3,693
42
Carrying amount of transferred assets
Carrying amount of associated liabilities
For those liabilities that have recourse
only to the transferred assets
Fair value of transferred assets
Fair value of associated liabilities
Net position
(1) Securitisation assets exclude $124,807 million of assets (2022: $127,801 million) where the Company holds all of the issued instruments of the securitisation vehicle.
(2) Comparative information has been restated to align to the presentation in the current period.
220 National Australia Bank
Notes to the financial statements
Other assets and liabilities
Note 22
Goodwill and other intangible assets
Accounting policy
Goodwill
Goodwill arises on the acquisition of an entity and represents the excess of the consideration paid over the fair value of
the identifiable net assets acquired.
Software costs
External and internal costs that are incurred to acquire or develop software are capitalised and recognised as an
intangible asset. Capitalised software costs and other intangible assets are amortised on a systematic basis once
deployed, using the straight-line method over their expected useful lives which are between three and ten years.
Impairment of intangible assets
Assets with an indefinite useful life, including goodwill, are not subject to amortisation and are tested on an annual basis
for impairment, and additionally whenever an indication of impairment exists. Assets that are subject to amortisation are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the carrying amount of an asset exceeds its
recoverable amount.
The recoverable amount of an asset is the higher of its fair value less costs of disposal or its value in use. For assets
that do not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit
(CGU) to which that asset belongs.
Goodwill impairment is assessed for each CGU or group of CGUs that represents the lowest level within the Group at which
goodwill is monitored for internal management purposes.
Recoverable amounts of CGUs
The recoverable amount of a CGU is determined using either value in use or fair value less costs of disposal. Assumptions
for determining the recoverable amount of each CGU are based on past experience and expectations for the future. Cash
flow projections for value in use are based on the latest management approved forecasts and are then extrapolated using
a constant growth rate for up to a further five years. These forecasts use management estimates to determine income,
expenses, capital expenditure and cash flows for each CGU.
The discount rate used reflects the market determined post-tax discount rate which is adjusted for specific risks relating
to the CGUs and the countries in which they operate. The growth rate applied to extrapolate cash flows beyond the
forecast period are based on forecast assumptions of the CGUs’ long-term performance in their respective markets.
Critical accounting judgements and estimates
The measurement of goodwill is subject to a number of key judgements and estimates. These include:
• The allocation of goodwill to CGUs on initial recognition.
• The re-allocation of goodwill in the event of disposal or reorganisation.
• The appropriate cash flow forecasts, growth rates and discount rates.
Further details about these items are provided below.
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2023 Annual Report
221
Notes to the financial statements
Note 22 Goodwill and other intangible assets (cont.)
Goodwill and other intangible assets
Goodwill
Internally generated software
Acquired software
Other acquired intangible assets(1)
Total goodwill and other intangible assets
At cost
Deduct: Accumulated amortisation / impairment losses
Total goodwill and other intangible assets
Group
Company
2023
$m
2,070
2,484
238
160
4,952
11,560
(6,608)
4,952
2022
$m
2,089
2,174
208
181
4,652
10,627
(5,975)
4,652
2023
$m
80
2,052
115
145
2,392
7,949
2022
$m
99
1,837
71
165
2,172
7,207
(5,557)
2,392
(5,035)
2,172
(1) Other acquired intangible assets primarily relate to the Citi consumer business customer relationships and core deposits.
Reconciliation of movements in goodwill and internally generated software
Goodwill
Balance at beginning of year
Acquisition of controlled entities and business combinations(1)(2)
Balance at end of year
Internally generated software
Balance at beginning of year
Additions from internal development
Disposals, impairments and write-offs
Amortisation
Foreign currency translation adjustments
Balance at end of year
Group
Company
2023
$m
2,089
(19)
2,070
2,174
863
(9)
(558)
14
2,484
2022
$m
1,964
125
2,089
1,956
730
(23)
(497)
8
2,174
2023
$m
99
(19)
80
1,837
702
(2)
(485)
-
2,052
2022
$m
-
99
99
1,703
584
(23)
(449)
22
1,837
(1) Goodwill decreased by $19 million compared to the September 2022 financial year due to post-completion adjustments arising from the Group's acquisition of the Citi
consumer business during the September 2022 financial year.
(2) Refer to Note 38 Acquisitions of subsidiaries for further details.
222 National Australia Bank
Notes to the financial statements
Note 22 Goodwill and other intangible assets (cont.)
Goodwill allocation to CGUs
The key assumptions used in determining the recoverable amount of CGUs, to which goodwill has been allocated, are as follows:
CGUs
Business and Private Banking
New Zealand Banking
Personal Banking(1)
ubank
Total goodwill
Goodwill
2023
$m
94
258
1,592
126
2,070
2022
$m
94
258
1,611
126
2,089
Discount
rate per
annum
2023
%
9.9
10.4
9.9
10.4
n/a
Terminal
growth
rate per
annum
2023
%
3.4
3.1
3.4
3.4
n/a
(1) Goodwill in the Personal Banking CGU decreased by $19 million compared to the September 2022 financial year due to post-completion adjustments arising from the
Group's acquisition of the Citi consumer business during the September 2022 financial year.
Note 23
Other assets
Other assets
Accrued interest receivable
Prepayments
Receivables
Other debt instruments at amortised cost
Equity instruments at fair value through other comprehensive income
Investment in associates - MLC Life(1)
Securities sold not delivered
Other
Total other assets
(1) Refer to table (b) in Note 32 Interest in subsidiaries and other entities for further details.
Group
Company
2023
$m
2022
$m
2023
$m
2022
$m
2,527
1,608
2,285
1,459
328
349
97
245
515
3,742
576
8,379
314
555
197
175
486
2,402
736
6,473
264
102
608
111
477
3,447
423
7,717
260
80
586
75
477
1,980
645
5,562
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2023 Annual Report
223
Notes to the financial statements
Note 24
Provisions
Accounting policy
Provisions
Provisions are recognised when the Group has a legal or constructive obligation as a result of a past event, it is probable
that an outflow of economic benefits will be required to settle the obligation and the amount of the obligation can be
reliably estimated. Provisions are not discounted to the present value of their expected net future cash flows except
where the time value of money is material.
Operational risk event losses
Provisions are recognised for non-lending losses which include losses arising from specific legal actions not directly
related to amounts of principal outstanding for loans and advances, and losses arising from forgeries, fraud and the
correction of operational issues.
Customer-related and payroll remediation
Provisions for customer-related and payroll remediation include provisions for potential refunds and other compensation
to customers, payments to colleagues, as well as associated program costs.
Critical accounting judgements and estimates
Provisions are held in respect of a range of future obligations such as employee entitlements, restructuring costs,
customer-related and payroll remediation. The recognition and measurement of some of these provisions involves
significant judgement about the existence of a present obligation, the likely outcome of various future events and the
related estimated future cash flows. If the future events are uncertain or where the outflows cannot be reliably measured
a contingent liability is disclosed, refer to Note 31 Commitments and contingent liabilities.
Payments that are expected to be incurred after more than one year from the reporting date are discounted at a rate
which reflects both current interest rates and the risks specific to that provision.
In relation to customer-related remediation, determining the amount of the provision requires the exercise of significant
judgement. This includes forming a view on a number of different estimates, including the number of impacted
customers, average refund per customer and the associated costs required to complete the remediation activities. The
appropriateness of underlying assumptions is reviewed on a regular basis against actual experience and other available
evidence, and adjustments are made to the provision where required.
Provisions
Employee entitlements
Operational risk event losses
Customer-related and payroll remediation
Other
Total provisions
Group
Company
2023
$m
1,021
43
305
483
1,852
2022
$m
1,026
47
557
466
2,096
2023
$m
872
25
305
449
2022
$m
905
29
554
409
1,651
1,897
224 National Australia Bank
Notes to the financial statements
Note 24 Provisions (cont.)
Reconciliation of movements in provisions
Operational risk event losses
Balance at beginning of year
Provisions made(1)
Payments out of provisions
Provisions no longer required and net foreign currency movements
Balance at end of year
Customer-related and payroll remediation
Balance at beginning of year
Provisions made (continuing operations)
Provisions made (discontinued operations)
Payments out of provisions
Balance at end of year
(1) Amounts include provisions made in both continuing and discontinued operations.
Note 25
Other liabilities
Other liabilities
Accrued interest payable
Payables and accrued expenses
Securities purchased not delivered
Lease liabilities
Trail commission payable(1)
Other
Total other liabilities
Group
Company
2023
$m
47
90
(94)
-
43
557
52
35
(339)
305
2022
$m
134
35
(92)
(30)
47
1,231
179
160
(1,013)
557
2023
$m
29
68
(72)
-
25
554
51
35
(335)
305
Group
Company
2023
$m
4,599
1,094
5,341
2,259
1,795
1,129
16,217
2022
$m
1,840
1,377
2,824
2,238
-
1,885
10,164
2023
$m
4,011
684
5,048
1,816
1,330
1,049
13,938
2022
$m
81
32
(84)
-
29
1,221
181
160
(1,008)
554
2022
$m
1,644
692
2,223
1,978
-
1,844
8,381
(1) During the 2023 financial year, the Group revised its accounting treatment of trail commissions payable to mortgage brokers to recognise a liability representing the
present value of expected future trail commission payments and a corresponding increase in capitalised brokerage costs within 'Loans and advances'. Comparative
information has not been restated. Refer to Note 1 Basis of preparation for further information.
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2023 Annual Report
225
Notes to the financial statements
Note 26
Leases
Accounting policy
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. At inception or on reassessment of a contract that contains a lease component, the Group allocates the
consideration in the contract to each lease component on the basis of their relative stand-alone selling prices. For leases
of land and buildings where the Group is the lessee, the Group has elected not to separate non-lease components, and
accounts for the lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset
is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made
at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and
remove the underlying asset or to restore the underlying asset, less any lease incentives received.
The right-of-use asset is subsequently measured under the cost model and depreciated using the straight-line method
from the commencement date to the end of the lease term. In addition, the right-of-use asset is reviewed for impairment
and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that have not been paid at the
commencement date, discounted using the Group’s incremental borrowing rate which is based on the Group’s funds
transfer pricing curve. The lease liability is subsequently measured at amortised cost using the effective interest method.
It is remeasured when there is a lease modification that is not accounted for as a separate lease, there is a change
in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the
amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will
exercise a purchase, extension or termination option. The Group does not include extension options in the measurement
of the lease liability until such time that it is reasonably certain that the options will be exercised.
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases and leases of
low-value assets. The Group recognises the lease payments associated with these leases as an expense on a straight-line
basis over the lease term.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating
lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all the
risks and rewards incidental to ownership of the underlying asset. Where this is the case, the lease is a finance lease. All
other leases are classified as operating leases.
Effect of leases on the balance sheets
Right-of-use assets
Property, plant and equipment
Buildings
Technology
Total right-of-use assets
Group
Company
2023
$m
1,912
47
1,959
2022
$m
1,883
63
1,946
2023
$m
1,481
45
1,526
2022
$m
1,628
60
1,688
Additions to right-of-use assets during the period
334
601
121
589
Lease liabilities
Other liabilities
Total lease liabilities
2,259
2,259
2,238
2,238
1,816
1,816
1,978
1,978
226 National Australia Bank
Notes to the financial statements
Note 26 Leases (cont.)
Effect of leases on the income statements
Depreciation
Buildings
Technology
Total depreciation on right-of-use assets
Interest
Interest expense on lease liabilities
Total interest expense on lease liabilities
Short-term lease expense
Short-term lease expense
Total short-term lease expense
Future cash flow effect of leases
Group
Company
2023
$m
318
20
338
49
49
7
7
2022
$m
331
17
348
46
46
11
11
2023
$m
264
18
282
39
39
4
4
2022
$m
284
16
300
40
40
5
5
The table below is a maturity analysis of future lease payments in respect of existing lease arrangements on an
undiscounted basis.
Due within one year
Due after one year but no later than five years
Due after five years
Total future lease payments
Group
Company
2023
$m
361
1,151
1,176
2,688
2022
$m
339
1,120
997
2,456
2023
2022
$m
306
974
686
$m
294
992
855
1,966
2,141
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2023 Annual Report
227
Notes to the financial statements
Capital management
Note 27
Contributed equity
In accordance with the Corporations Act 2001 (Cth), the Company does not have authorised capital and all ordinary shares have
no par value. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are included within equity. Holders of ordinary shares are entitled to receive dividends as determined from time to time
and are entitled to one vote, on a show of hands or on a poll, for each fully paid ordinary share held at shareholders’ meetings.
In the event of a winding-up of the Company, ordinary shareholders rank after all other shareholders and creditors and are fully
entitled to any residual proceeds of liquidation.
Issued and paid-up ordinary share capital
Ordinary shares, fully paid
Total contributed equity
Reconciliation of movement in ordinary shares
Balance at beginning of year
Shares issued:
Dividend reinvestment plan
Transfer from equity-based compensation reserve
Purchase of treasury shares for employee share offer
On-market purchase of shares for dividend reinvestment
plan neutralisation
Share buy-back
Balance at end of year
Group
Company
2023
$m
38,546
38,546
2022
$m
39,399
39,399
2023
$m
37,760
37,760
Group
Company
2023
$m
39,399
693
74
(23)
(693)
(904)
38,546
2022
$m
43,247
500
69
-
(500)
(3,917)
39,399
2023
$m
38,613
693
74
(23)
(693)
(904)
37,760
2022
$m
38,613
38,613
2022
$m
42,461
500
69
-
(500)
(3,917)
38,613
228 National Australia Bank
Notes to the financial statements
Note 27 Contributed equity (cont.)
The number of ordinary shares on issue for the last two years as at 30 September was as follows:
Ordinary shares, fully paid
Balance at beginning of year
Shares issued:
Dividend reinvestment plan
Bonus share plan
Share-based payments
Paying up of partly paid shares
On-market purchase of shares for dividend reinvestment plan neutralisation
Share buy-back
Total ordinary shares, fully paid
Ordinary shares, partly paid to 25 cents
Balance at beginning of year
Paying up of partly paid shares
Total ordinary shares, partly paid to 25 cents
Total ordinary shares (including treasury shares)
Less: Treasury shares
Total ordinary shares (excluding treasury shares)
Company
2023
2022
No. ’000
No. ’000
3,153,813
3,281,991
24,676
1,338
3,628
3
(24,676)
(29,833)
16,890
1,227
5,547
-
(16,890)
(134,952)
3,128,949
3,153,813
12
(3)
9
12
-
12
3,128,958
3,153,825
(8,137)
(6,331)
3,120,821
3,147,494
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Note 28
Non-controlling interests
Non-controlling interests represent the share in the net assets of controlled entities attributable to equity interests which the
Company does not own directly or indirectly.
S
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Non-controlling interests
BNZ perpetual preference shares
Total
Bank of New Zealand preference shares
Group
Company
2023
$m
349
349
2022
$m
-
-
2023
$m
-
-
2022
$m
-
-
On 14 June 2023, Bank of New Zealand (BNZ), a wholly owned subsidiary of the Group, issued NZD $375 million of perpetual
preference shares (PPS) that are classified as non-controlling interests to the Group. The balance as at 30 September 2023
represents an AUD equivalent of $341 million of PPS issued and $8 million impact of changes in the exchange rate between AUD
and NZD during the 2023 financial year.
The key terms of the PPS are summarised below:
PPS distributions
Distributions on the PPS are discretionary and non-cumulative. If a PPS distribution is not paid in full within 3 business days of
a distribution payment date, BNZ must not authorise or pay a dividend on its ordinary shares, acquire its ordinary shares or
otherwise undertake a capital reduction in respect of its ordinary shares, until a subsequent PPS distribution is paid in full or
there are no longer any PPS outstanding.
The distribution rate for the PPS is fixed at 7.30% per annum until the first optional redemption date of 14 June 2029. After this date
the distribution rate will be a floating rate, reset quarterly, equal to the New Zealand 3 month bank bill rate plus 3.0%. Scheduled
distribution payment dates are on 14 March, 14 June, 14 September and 14 December each year. Any distributions will comprise a
cash amount and imputation credits.
Redemption
The PPS have no fixed maturity date and will remain on issue indefinitely if not redeemed by BNZ.
BNZ may redeem the PPS on the first optional redemption date of 14 June 2029 or on each quarterly scheduled distribution
payment date thereafter, or at any time if a tax event or regulatory event occurs. Redemption is subject to certain conditions
being met, including obtaining the RBNZ’s approval. Holders of PPS have no right to require that the PPS be redeemed.
2023 Annual Report
229
m
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Notes to the financial statements
Note 29
Reserves
Accounting policy
Foreign currency translation reserve
Exchange differences arising on translation of the Group’s foreign operations, any offsetting gains or losses on net
investment hedges and any associated tax effect are reflected in the foreign currency translation reserve.
The results and financial position of the Group entities that have a functional currency different from Australian dollars are
translated into Australian dollars as follows:
• Assets and liabilities are translated at the closing exchange rate at the balance sheet date.
•
Income and expenses are translated at average exchange rates for the period.
• All resulting exchange differences are recognised in the foreign currency translation reserve.
A cumulative credit balance in this reserve would not normally be regarded as available for payment of dividends until such
gains are realised and recognised in the income statement on sale or disposal of the foreign operation.
Asset revaluation reserve
The asset revaluation reserve is used to record revaluation adjustments on land and buildings. When an asset is sold or
disposed of the related balance in the reserve is transferred directly to retained profits.
Cash flow hedge reserve and cost of hedging reserve
For qualifying hedging instruments, the Group excludes foreign currency basis spreads from hedge designations. Any
change in the fair value of these hedging instruments for changes in cross currency basis spreads is deferred to the cost
of hedging reserve and released to profit or loss either when the hedged exposure affects profit or loss or on a systematic
basis over the life of the hedge. The cumulative movements are expected to be nil by maturity of the hedging instruments.
Equity-based compensation reserve
The equity-based compensation reserve comprises the fair value of shares and rights provided to employees.
Debt instruments at fair value through other comprehensive income reserve
The reserve includes all changes in the fair value of investments in debt instruments that are measured at fair value
through other comprehensive income, other than impairment losses, foreign exchange gains and losses, interest income
and net of any related hedge accounting adjustments. The cumulative amount recognised in the reserve is transferred to
profit or loss when the related asset is derecognised.
Equity instruments at fair value through other comprehensive income reserve
The Group has made an irrevocable election to measure certain investments in equity instruments that are not held for
trading purposes at fair value through other comprehensive income. Changes in the fair value of these investments are
recognised in this reserve, while dividends are recognised in profit or loss. The cumulative amount recognised in the
reserve is transferred directly to retained profits when the related asset is derecognised.
230 National Australia Bank
Notes to the financial statements
Note 29 Reserves (cont.)
Reserves
Foreign currency translation reserve
Asset revaluation reserve
Cash flow hedge reserve
Cost of hedging reserve
Equity-based compensation reserve
Debt instruments at fair value through other comprehensive income reserve
Equity instruments at fair value through other comprehensive income reserve
Group
Company
2023
$m
156
21
2022
$m
(516)
25
2023
$m
(134)
-
2022
$m
(222)
-
(1,611)
(1,667)
(1,688)
(1,900)
(34)
237
5
34
81
180
36
22
(5)
237
5
20
28
180
36
4
Total reserves
(1,192)
(1,839)
(1,565)
(1,874)
Foreign currency translation reserve
Balance at beginning of year
Transfer from retained profits
Currency adjustments on translation of foreign operations, net of hedging
Transfer to the income statement on disposal or partial disposal of
foreign operations(1)
Balance at end of year
(1) Partial disposals of foreign operations include returns of capital made by foreign branches.
Note 30
Dividends
Dividends paid
For the year ended 30 September 2023
Final dividend determined in respect of the year ended 30 September 2022
Interim dividend determined in respect of the year ended 30 September 2023
Deduct: Bonus shares in lieu of dividend
Dividends paid by the Company during the year ended 30 September 2023
Add: Dividends paid to non-controlling interests in controlled entities
Total dividends paid by the Group (before dividend reinvestment plan)
For the year ended 30 September 2022
Final dividend determined in respect of the year ended 30 September 2021
Interim dividend determined in respect of the year ended 30 September 2022
Deduct: Bonus shares in lieu of dividend
Total dividends paid by the Group (before dividend reinvestment plan)
Dividends paid during 2023 were fully franked at a tax rate of 30% (2022: 30%).
Group
Company
2023
$m
(516)
-
701
(29)
156
2022
$m
288
1
(776)
(29)
(516)
2023
$m
(222)
-
117
(29)
(134)
2022
$m
(200)
-
(22)
-
(222)
Amount
per share
Total
amount
cents
$m
78
83
n/a
n/a
n/a
n/a
67
73
n/a
n/a
2,460
2,605
(38)
5,027
5
5,032
2,196
2,347
(37)
4,506
2023 Annual Report
231
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Notes to the financial statements
Note 30 Dividends (cont.)
Final dividend
On 9 November 2023, the directors determined the following dividend:
Final dividend determined in respect of the year ended 30 September 2023
Amount
per share
Total
amount
cents
84
$m
2,628
Franked
amount
per share
%
100
The 2023 final dividend is payable on 15 December 2023. The DRP discount for the 2023 final dividend is nil. Eligible shareholders
have the ability to participate in the DRP for the 2023 final dividend for up to 5 million NAB ordinary shares per participant. The
financial effect of this dividend has not been brought to account in the financial statements for the year ended 30 September
2023 and will be recognised in subsequent financial reports.
Australian franking credits
The franking credits available to the Company as at 30 September 2023 are estimated to be $768 million (2022: $665 million) after
allowing for Australian tax payable in respect of the current reporting period's profit and the receipt of dividends recognised as a
receivable at reporting date.
The final 2023 dividend will utilise the balance of franking credits available as at 30 September 2023. The Company's franking
account will fluctuate during the year depending on the timing of tax and dividend payments. A surplus franking account balance
is only required as at 30 June each year for the purpose of complying with Australian income tax legislation. Instalment tax
payments made after 30 September 2023 will generate sufficient franking credits to enable the final 2023 dividend to be fully
franked and comply with the income tax legislation.
Franking is not guaranteed. The extent to which future dividends on ordinary shares and distributions on frankable hybrids will be
franked will depend on a number of factors, including capital management activities and the level of profits that will be subject to
tax in Australia.
New Zealand imputation credits
The New Zealand imputation credits available to the Company as at 30 September 2023 are estimated to be NZD $2,273 million
(2022: NZD $232 million). The increase in this balance is due to the NZD $5.0 billion dividend that was paid by BNZ in the 2023
financial year.
The Company is able to attach available New Zealand imputation credits to dividends paid. As a result, New Zealand imputation
credits of NZD $0.15 per share will be attached to the final 2023 dividend payable by the Company. New Zealand imputation credits
are only relevant for shareholders who are required to file New Zealand income tax returns.
232 National Australia Bank
Notes to the financial statements
Unrecognised items
Note 31
Commitments and contingent liabilities
Accounting policy
The Group discloses certain items as contingent liabilities, as they are either possible obligations whose existence will be
confirmed only by uncertain future events, or they are present obligations where a transfer of economic resources is not
probable or cannot be reliably measured. Contingent liabilities are not recognised on the balance sheet but are disclosed
unless an outflow of economic resources is remote.
Commitments
Financial assets are pledged as collateral predominantly under repurchase agreements with other banks. The financial assets
pledged by the Group are strictly for the purpose of providing collateral for the counterparty. These transactions are conducted
under terms that are usual and customary to standard lending and securities borrowing and lending activities, as well as
requirements determined by exchanges where the Group acts as an intermediary. Repurchase agreements that do not qualify
for derecognition are reported in Note 21 Financial asset transfers.
Bank guarantees and letters of credit
The Group provides guarantees in its normal course of business on behalf of its customers. Guarantees written are conditional
commitments issued by the Group to guarantee the performance of a customer to a third party. Guarantees are primarily issued
to support direct financial obligations such as commercial bills or other debt instruments issued by a counterparty. The Group
has four principal types of guarantees:
• Bank guarantees.
• Standby letters of credit.
• Documentary letters of credit.
• Performance-related contingencies.
The Group considers all bank guarantees and letters of credit as “at call” for liquidity management purposes because it has no
control over when the holder might call upon the instrument.
Bank guarantees and letters of credit
Bank guarantees
Standby letters of credit
Documentary letters of credit
Performance-related contingencies(1)
Total bank guarantees and letters of credit
Group
Company
2023
$m
5,249
7,380
2,767
10,925
26,321
2022
$m
4,912
7,270
3,358
10,143
25,683
2023
$m
5,421
7,380
2,434
9,402
2022
$m
4,859
7,270
2,942
8,887
24,637
23,958
(1) Comparative information has been restated to reflect product reclassification in the 2023 financial year
Clearing and settlement obligations
The Group is subject to a commitment in accordance with the rules governing clearing and settlement arrangements contained
in the Australian Payments Network Regulations for the Australian Paper Clearing System, the Bulk Electronic Clearing System, the
Consumer Electronic Clearing System and the High Value Clearing System which could result in a credit risk exposure and loss in
the event of a failure to settle by a member institution. The Group also has a commitment in accordance with the Austraclear
System Regulations and the Continuous Linked Settlement Bank Rules to participate in loss-sharing arrangements in the event
that another financial institution fails to settle.
The Group is a member of various central clearing houses, most notably the London Clearing House (LCH) SwapClear and
RepoClear platforms and the ASX Over-The-Counter Central Counterparty, which enables the Group to centrally clear derivative
and repurchase agreement instruments respectively. As a member of these central clearing houses, the Group is required
to make a default fund contribution. The exposure to risk associated with this commitment is reflected for capital adequacy
purposes in the Group’s Pillar 3 reporting. In the event of a default of another clearing member, the Group could be required to
commit additional funds to the default fund contribution.
Credit-related commitments
Binding credit-related commitments to extend credit are agreements to lend to a customer provided that there is no violation
of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee by the customer. Since many of the commitments are expected to expire without being drawn
down, the total commitment amounts do not necessarily represent future cash requirements. Nevertheless, credit-related
commitments are considered “at call” for liquidity management purposes.
2023 Annual Report
233
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Note 31 Commitments and contingent liabilities (cont.)
Credit-related commitments
Binding credit commitments(1)
Total credit-related commitments
Credit-related commitments by geographical location
Australia
New Zealand
Other International
Total credit-related commitments
Group
Company
2023
$m
2022
$m
2023
$m
2022
$m
208,853
208,853
201,147
201,147
188,268
188,268
182,667
182,667
165,594
19,985
23,274
208,853
162,265
17,901
20,981
201,147
164,994
161,686
-
23,274
188,268
-
20,981
182,667
(1) Comparative information has been restated to reflect product reclassification in the 2023 financial year
Parent entity guarantees and undertakings
The Company has provided the following guarantees and undertakings relating to entities in the Group. These guarantees and
undertakings are not included in previous tables in this note:
• The Company will guarantee up to $30,881 million (2022: $29,023 million) of commercial paper issuances by National Australia
Funding (Delaware) Inc. Commercial paper of $419 million (2022: $1,196 million) has been issued.
• The Company is responsible to its customers for any direct loss suffered as a result of National Nominees Limited failing to
perform its obligations to the Company.
• The Company and MLC Wealth had both been granted a licence (the Licence) in 2007 by the Safety, Rehabilitation and
Compensation Commission (the Commission) to operate as self-insurers under the Commonwealth Government Comcare
Scheme (the Commonwealth Scheme). The Company still holds its Licence and continues to be self-insured under the
Commonwealth Scheme. Following the sale of MLC Wealth to Insignia Financial Ltd (formerly IOOF) in 2021, the Commission
agreed to revoke MLC Wealth’s Licence effective from the date of the sale. As required by legislation and the Commission, the
Company has provided a guarantee in respect of any workers' compensation liabilities of employees of MLC Wealth in respect
of injuries that arose before the completion of the sale.
• The Company has issued letters of support in respect of certain subsidiaries and associates in the normal course of business.
The letters recognise that the Company has a responsibility to ensure that those subsidiaries and associates continue to
meet their obligations.
Contingent liabilities
The Group is exposed to contingent risks and liabilities arising from the conduct of its business including:
• Actual and potential disputes, claims and legal proceedings.
•
•
Investigations into past conduct, including actual and potential regulatory breaches carried out by regulatory authorities on
either an industry-wide or Group-specific basis.
Internal investigations and reviews into past conduct, including actual and potential regulatory breaches, carried out by or on
behalf of the Group.
• Contracts that involve giving contingent commitments such as warranties, indemnities or guarantees.
There are contingent liabilities in respect of all such matters. Such matters are often highly complex and uncertain. Where
appropriate, provisions have been made. The aggregate potential liability of the Group in relation to these matters cannot be
accurately assessed.
Further details on some specific contingent liabilities that may impact the Group are set out below.
Legal proceedings
United Kingdom matters
Nine separate claims (comprising 904 individual claimants) focused on Tailored Business Loans (TBLs) have been commenced
against the Company and Clydesdale Bank Plc, now owned by Virgin Money UK Plc and trading as Virgin Money (Virgin Money) by
former customers of Virgin Money, represented by RGL Management Limited (a claims management company) (RGL) and law firm
Fladgate LLP, in the English Courts. The cases involving four individual claimants (being the first and fourth claims) proceeded to a
12 week trial which commenced on 2 October 2023, effectively as test cases. The cases of the remaining individual claimants are
currently stayed pending the outcome of the first and fourth claims.
The claims concern TBLs which customers entered into with Virgin Money and in respect of which NAB employees performed
various functions. The claimants allege they were misled about: (1) the cost of repaying (or restructuring) their TBLs early; and (2)
the composition of fixed interest rates/other rates offered under the TBLs. The alleged misconduct is said to give rise to several
causes of action, including negligent misstatement, misrepresentation and deceit.
The potential outcome and total costs associated with the claims remain uncertain.
234 National Australia Bank
Notes to the financial statements
Note 31 Commitments and contingent liabilities (cont.)
Walton Construction Group class action
In January 2022, a class action complaint was filed in the Federal Court by a number of subcontractors regarding the Company's
alleged conduct in connection with the collapse of the Walton Construction Group (WCG). It is alleged that the Company's
conduct in the period prior to the collapse of WCG contributed to losses incurred by subcontractors following the liquidation
of WCG. The Company filed and served its defence to the claims on 16 December 2022, however, the Applicant is seeking to
file a second Further Amended Statement of Claim (FASC) and has been given until 7 February 2024 to provide a draft FASC. The
potential outcome and total costs associated with the claims under this class action remain uncertain.
Regulatory activity, compliance investigations and associated proceedings
Anti-Money Laundering and Counter-Terrorism Financing program uplift and compliance issues
The Group continues to enhance its systems and processes to comply with AML and CTF requirements. The Group continues to
keep AUSTRAC informed of its progress. In addition to an ongoing general uplift in capability, the Group is remediating specific
known compliance issues and weaknesses. The Group has reported a number of compliance issues to relevant regulators,
including in relation to ‘Know Your Customer’ (KYC) requirements (particularly with enhanced customer due diligence for non-
individual customers), systems and process issues that impacted some aspects of transaction monitoring and reporting, and
other financial crime risks. As this work progresses, further compliance issues may be identified and reported to AUSTRAC or
equivalent foreign regulators, and additional uplifting and strengthening may be required.
On 29 April 2022, the Company entered into an enforceable undertaking (EU) with AUSTRAC to address AUSTRAC’s concerns with
the Group’s compliance with certain AML and CTF requirements. In accepting the EU, AUSTRAC stated that the regulator had
“formed the view at the start of the investigation that a civil penalty proceeding was not appropriate at that time” and that it had
“not identified any information during the investigation to change that view”. Under the terms of the EU, the Company and certain
subsidiaries are required to:
• Complete a Remedial Action Plan (RAP) approved by AUSTRAC.
• Address to AUSTRAC’s satisfaction any deficiencies or concerns with activities in the RAP identified by AUSTRAC.
Whilst the Company has delivered the approved RAP and approximately three quarters of the required deliverables, the total
costs of the above remains uncertain and the conclusion or otherwise of the EU will be determined by AUSTRAC.
Banking matters
A number of reviews into banking-related matters are being carried on across the Group, both internally and in some cases by
regulatory authorities, including matters regarding:
•
•
Incorrect fees being applied in connection with certain products.
Incorrect interest rates being applied in relation to certain products, including home lending products on conversion from
interest only to principal.
• Capturing customer consent to receive electronic statements and inconsistencies with recording statement preferences.
•
Issues with treatment of deregistered companies identified in the customer base.
The potential outcome and total costs associated with these matters remains uncertain.
Employment matters
In December 2019, NAB announced an end-to-end payroll review examining internal pay processes and compliance with pay
related obligations under Australian employment laws. The review identified a range of issues, which have been notified to the
Fair Work Ombudsman (FWO). A remediation program was undertaken, which is now largely complete save for some discrete
residual matters still being addressed. There remains some potential for further developments regarding this matter, including
possible enforcement action by the FWO or other legal actions, so the final outcome and total costs associated with this matter
remain uncertain.
In March 2023, the Finance Sector Union (FSU) filed proceedings against NAB and MLC Wealth Ltd in the Federal Court alleging that
those parties had breached provisions of the Fair Work Act which prohibit an employer from requesting or requiring an employee
to work unreasonable additional hours. The claim relates to four current and former employees. The FSU is seeking declarations
that NAB and MLC Wealth Ltd breached the Fair Work Act, the imposition of penalties in respect of the alleged breaches, as well
as compensation for loss and damage to the four named current and former employees and the payment of legal costs. The final
outcome and total costs associated with this matter remain uncertain.
Wealth - Advice review
In October 2015, the Group began contacting certain groups of customers where there was a concern that they may have
received non-compliant financial advice since 2009 to: (a) assess the appropriateness of that advice; and (b) identify whether
customers had suffered loss as a result of non-compliant advice that would warrant compensation. Subsequent to this, these
cases are now progressing through the Customer Response Initiative review program, the scope of which includes the advice
businesses of MLC Advice, NAB Advice Partnerships and JBWere, with compensation offered and paid in a number of cases(1).
Where customer compensation is able to be reliably estimated, provisions have been recognised. The final outcome and total
costs associated with this work remain uncertain.
(1) While the businesses of MLC Advice and NAB Advice Partnerships relevant to these matters have been sold to Insignia Financial Ltd (formerly known as IOOF) pursuant to
the MLC Wealth Transaction, the Group has retained the companies that operated the advice business, such that the Group has retained all liabilities associated with
the conduct of these businesses pre-completion of the MLC Wealth Transaction. JBWere is not within the scope of the MLC Wealth Transaction.
2023 Annual Report
235
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Notes to the financial statements
Note 31 Commitments and contingent liabilities (cont.)
Wealth - Adviser service fees
The Group is undertaking a remediation program in relation to financial advice fees paid by customers pursuant to ongoing
service arrangements. This matter relates to JBWere and the various advice businesses, which were operated by the Group prior
to completion of the MLC Wealth Transaction discussed below, including MLC Advice (formerly known as NAB Financial Planning)
and NAB Advice Partnerships.(1) Payments with respect to MLC Advice are now complete. Payments with respect to NAB Advice
Partnerships are largely complete.
JBWere has identified its potentially impacted customers and has commenced making remediation payments where appropriate.
JBWere continues to assess further matters which may impact clients including clients who are members of an APRA regulated
superannuation fund and their treatment as a wholesale client instead of retail.
While the Group has taken provisions in relation to these matters based on current information, there remains the potential for
further developments and the potential outcomes and total costs associated with these matters remains uncertain.
Contractual commitments
BNZ Life transaction
On 30 September 2022, National Wealth Management International Holdings Limited (NWMIH), a wholly owned subsidiary of the
Company, completed the sale of BNZ Life to Partners Life. Under the sale agreements, NWMIH has provided certain warranties
and indemnities in favour of Partners Life, a breach of which may result in NWMIH or the Company (as a guarantor to NWMIH under
the terms of the sale) being liable to Partners Life. NWMIH has novated its obligations under the sale agreements, including with
regards to the warranties and indemnities in favour of Partners Life, to the Company. The potential outcome and total costs
associated with this transaction remain uncertain.
MLC Life insurance transaction
In connection with the sale of 80% of MLC Life to Nippon Life Insurance Company (Nippon Life) in October 2016, the Company
gave certain covenants, warranties and indemnities in favour of Nippon Life and MLC Life. The claims periods for some of these
covenants, warranties and indemnities have expired. The potential outcome and total costs associated with any claims under
these covenants, warranties and indemnities remain uncertain.
MLC Wealth Transaction
On 31 May 2021, the Group completed the sale of MLC Wealth, comprising its advice, platforms, superannuation and investments,
and asset management businesses to Insignia Financial. As part of the MLC Wealth Transaction, the Company has provided
Insignia Financial with indemnities relating to certain pre-completion matters, including:
• A remediation program relating to workplace superannuation (including matters where some employer superannuation plans
and member entitlements were not correctly set up in the administration systems, and matters relating to disclosure and
administration of certain features of the super product such as insurance and fees).
• Breaches of anti-money laundering laws and regulations.
• Regulatory fines and penalties.
• Certain litigation and regulatory investigations (including the NULIS and MLCN class actions described below).
The Company also provided covenants and warranties in favour of Insignia Financial. A breach or triggering of these contractual
protections may result in the Company being liable to Insignia Financial. The claims periods for some of these covenants,
warranties and indemnities have expired.
As part of the MLC Wealth Transaction, the Group retained the companies that operated the advice business, such that the
Group has retained all liabilities associated with the conduct of that business pre-completion.
The Company has also agreed to provide Insignia Financial with certain transitional services and continuing access to records,
as well as support for data migration activities. The Company may be liable to Insignia Financial if it fails to perform its obligations
under these agreements.
The final financial impact associated with the MLC Wealth Transaction remains uncertain and subject to finalisation of the
completion accounts process and other contingencies as outlined above.
NULIS and MLCN - class actions
In October 2019, litigation funder Omni Bridgeway (formerly IMF Bentham) and William Roberts Lawyers commenced a class action
against NULIS Nominees (Australia) Limited (NULIS) alleging breaches of NULIS’s trustee obligations to act in the best interests
of the former members of The Universal Super Scheme in deciding to maintain grandfathered commissions on their transfer
into the MLC Super Fund on 1 July 2016. NULIS filed its first defence in the proceeding in February 2020. An initial trial to make
determinations on the individual claims of the applicant and one sample group member was held on 9 October 2023. Judgment
has been reserved.
In January 2020, Maurice Blackburn commenced a class action in the Supreme Court of Victoria against NULIS and MLC Nominees
Pty Ltd (MLCN) alleging breaches of NULIS's trustee obligations in connection with the speed with which NULIS and MLCN effected
transfers of members’ accrued default amounts to the MySuper product (Supreme Court Class Action). NULIS and MLCN filed their
joint defence in the proceeding in April 2020.
(1) While the businesses of MLC Advice and NAB Advice Partnerships relevant to these matters have been sold to Insignia Financial Ltd (formerly known as IOOF) pursuant to
the MLC Wealth Transaction, the Group has retained the companies that operated the advice business, such that the Group has retained all liabilities associated with
the conduct of these businesses pre-completion of the MLC Wealth Transaction. JBWere is not within the scope of the MLC Wealth Transaction.
236 National Australia Bank
Notes to the financial statements
Note 31 Commitments and contingent liabilities (cont.)
The potential outcomes and total costs associated with these matters remains uncertain. While NULIS and MLCN are no longer
part of the Group following completion of the MLC Wealth Transaction, the Company remains liable for the costs associated with,
and retains conduct of, these matters pursuant to the terms of the MLC Wealth Transaction.
Note 32
Interest in subsidiaries and other entities
Accounting policy
Investments in controlled entities
Controlled entities are all those entities (including structured entities) to which the Company is exposed, or has rights,
to variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. An assessment of control is performed on an ongoing basis. Entities are consolidated from the date on
which control is obtained by the Group. Entities are deconsolidated from the date that control ceases. The effects of
transactions between entities within the Group are eliminated in full upon consolidation.
Investments in associates
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate
in the financial and operating policy decisions of the investee but is not control or joint control of those policies. The
Group's investments in associates are accounted for using the equity method, with the carrying amount of the investment
increased or decreased to recognise the Group's share of the profit or loss of the investee.
Structured entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in
deciding who controls the entity. Structured entities generally have restricted activities and a narrow and well-defined
objective which is created through contractual arrangement. Depending on the Group's power over the relevant activities
of the structured entity and its exposure to and ability to influence its own returns, it may or may not consolidate
the entity.
Unconsolidated structured entities refer to all structured entities that are not controlled by the Group. The Group
enters into transactions with unconsolidated structured entities in the normal course of business to facilitate customer
transactions or for specific investment opportunities.
Interests in unconsolidated structured entities include, but are not limited to, debt and equity investments, guarantees,
liquidity arrangements, commitments, fees from investment structures, and derivative instruments that expose the Group
to the risks of the unconsolidated structured entities. Interests do not include plain vanilla derivatives (e.g. interest rate
swaps and cross currency swaps) and positions where the Group:
• Creates rather than absorbs variability of the unconsolidated structured entity.
• Provides administrative, trustee or other services as agent to third party managed structured entities.
Involvement is considered on a case by case basis, taking into account the nature of the structured entity’s activities. This
excludes involvement that exists only because of typical customer-supplier relationships.
(a) Investments in controlled entities
The following table presents the material controlled entities as at 30 September 2023:
Entity name
National Equities Limited
National Australia Group (NZ) Limited
Bank of New Zealand
Significant restrictions
Ownership %
Incorporated /
formed in
100
100
100
Australia
New Zealand
New Zealand
Subsidiary companies that are subject to prudential regulation are required to maintain minimum capital and other regulatory
requirements that may restrict the ability of these entities to make distributions of cash or other assets to the parent company.
These restrictions are managed in accordance with the Group’s normal risk management policies set out in Note 19 Financial risk
management and capital adequacy requirements in Note 36 Capital adequacy.
2023 Annual Report
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Notes to the financial statements
Note 32 Interest in subsidiaries and other entities (cont.)
(b) Investments in associates
The Group’s investments in associates include a 20% interest in MLC Life, a provider of life insurance products in Australia. Set out
below is the summarised financial information of MLC Life based on its financial information (and not the Group’s 20% share of
those amounts) and a reconciliation of that information to the equity-accounted carrying amount as at 30 September:
Summarised income statement of MLC Life
Revenue
Net profit for the period
Total comprehensive income for the period
Reconciliation to the Group's share of profit
MLC Life's net profit for the period
Prima facie share of profit at 20%
Group's share of profit for the period
Summarised balance sheet of MLC Life
Total assets
Total liabilities
Net assets
Reconciliation to the Group's investment in MLC Life
Prima facie share of net assets at 20%
Accumulated impairment losses
Group's carrying amount of the investment in MLC Life
2023
$m
1,656
146
146
146
29
29
7,137
4,129
3,008
2022
$m
949
69
69
69
14
14
6,841
3,979
2,862
601
(86)
515
572
(86)
486
There was no dividend received from MLC Life during the 2023 financial year (2022: $nil).
Impact of AASB 17 Insurance Contracts
AASB 17 will be effective for the Group from 1 October 2023. AASB 17 will change the timing of profit recognition from insurance
contracts. In general, profits will be recognised later than under the current accounting standard.
On transition to AASB 17 the value of MLC Life’s insurance and reinsurance contract liabilities, net of insurance and reinsurance
contract assets, is expected to increase by approximately $1.5 billion, before associated tax impacts. As a result, the carrying
value of the Group's investment in MLC Life is expected to reduce by approximately $200 million with a corresponding decrease in
retained earnings as at 1 October 2023.
Significant restrictions
Assets in a statutory fund of MLC Life can only be used to meet the liabilities and expenses of that fund, to acquire investments
to further the business of that fund, or to make profit distributions when solvency and capital adequacy requirements of the
Life Insurance Act 1995 (Cth) are met. This may impact MLC Life's ability to transfer funds to the Group in the form of dividends. In
addition, in certain circumstances the payment of dividends may require approval by APRA.
Transactions
As part of a long-term commercial arrangement with Nippon Life and MLC Life, the Group refers certain bank customers to MLC
Life. Under a financial services agreement and certain linked arrangements, the Group provides MLC Life with certain financial
services on an arm’s length basis, including custody, transactional banking facilities, fixed income and currency services.
238 National Australia Bank
Notes to the financial statements
Note 32 Interest in subsidiaries and other entities (cont.)
(c) Consolidated structured entities
The Group has interests in the following types of consolidated structured entities:
Type
Securitisation
Covered bonds
Details
The Group engages in securitisation activities for funding, liquidity and capital management purposes.
The Group principally packages and sells residential mortgage loans as securities to investors through a
series of bankruptcy remote securitisation vehicles. The Group is entitled to any residual income after
all payments to investors and costs related to the program have been met. The note holders only have
recourse to the pool of assets. The Group is considered to hold the majority of the residual risks and
benefits of the vehicles. All relevant financial assets continue to be held on the Group balance sheet, and a
liability is recognised for the proceeds of the funding transaction.
The Group provides liquidity facilities to the securitisation vehicles. These facilities can only be drawn to
manage the timing mismatch of cash inflows from securitised loans and cash outflows due to investors.
The Group also provides redraw facilities to certain securitisation vehicles to manage the timing mismatch
of principal collections from securitised loans and cash outflows in respect of customer redraws. The
aggregate limit of these liquidity and redraw facilities as at 30 September 2023 is $1,364 million.
The Group is entitled to any residual income after all payments due to covered bonds investors and costs
related to the program have been met. Residential mortgage loans are assigned to a bankruptcy remote
structured entity, which provides guarantees on the payments to covered bondholders. The covered
bondholders have recourse to the Group and, following certain trigger events including payment default,
the covered pool assets.
(d) Unconsolidated structured entities
The Group has interests in the following types of unconsolidated structured entities:
Type
Securitisation
Other financing
Details
The Group engages with third party (client) securitisation vehicles by providing warehouse facilities, liquidity
support and derivatives. The Group invests in residential mortgage and asset-backed securities.
The Group provides tailored lending to limited recourse single purpose vehicles which are established to
facilitate asset financing for clients. The assets are pledged as collateral to the Group. The Group engages
in raising finance for leasing assets such as aircraft, trains, shipping vessels and other infrastructure
assets. The Group may act as a lender, arranger or derivative counterparty to these vehicles.
Other financing transactions are generally senior, secured self-liquidating facilities in compliance with
Group credit lending policies. Regular credit and financial reviews of the borrowers are conducted to ensure
collateral is sufficient to support the Group’s maximum exposures.
Investment funds
The Group has direct interests in unconsolidated investment funds. The Group’s interests include holding
units and receiving fees for services. The Group’s interest in unconsolidated investment funds is immaterial.
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2023 Annual Report
239
Notes to the financial statements
Note 32 Interest in subsidiaries and other entities (cont.)
The table below shows the carrying value and maximum exposure to loss of the Group’s interests in unconsolidated
structured entities:
Loans and advances
Debt instruments
Total carrying value of assets in
unconsolidated structured entities
Commitment / contingencies
Total maximum exposure to loss in
unconsolidated structured entities
Securitisations
Other financing
Total
Group
2023
$m
19,833
6,536
26,369
7,486
2022
$m
22,849
6,283
29,132
8,490
33,855
37,622
2023
$m
2,564
-
2,564
62
2,626
2022
$m
3,132
-
3,132
121
3,253
2023
$m
22,397
6,536
28,933
7,548
2022
$m
25,981
6,283
32,264
8,611
36,481
40,875
Exposure to loss is managed as part of the Group's RMF. The Group’s maximum exposure to loss is the total of its on-balance
sheet positions and its off-balance sheet arrangements, being loan commitments, financial guarantees, and liquidity support.
Consequently, the Group has presented these measures rather than the total assets of the unconsolidated structured entities.
Refer to Note 19 Financial risk management for further details. Income earned from interests in unconsolidated structured
entities primarily results from interest income, mark-to-market movements and fees and commissions.
The majority of the Group’s exposures are senior investment grade, but in some limited cases, the Group may be required to
absorb losses from unconsolidated structured entities before other parties because the Group’s interests are subordinated
to others in the ownership structure. The table below shows the credit quality of the Group’s exposures in unconsolidated
structured entities:
Senior investment grade
Investment grade
Sub-investment grade
Total(1)
Group
Securitisations
Other financing
Total
2023
$m
26,358
9
2
2022
$m
29,065
57
10
26,369
29,132
2023
$m
708
1,352
504
2,564
2022
$m
790
1,419
923
3,132
2023
$m
27,066
1,361
506
28,933
2022
$m
29,855
1,476
933
32,264
(1) Of the total, $28,798 million (2022: $32,051 million) represents the Group's interest in senior notes and $135 million in subordinated notes (2022: $213 million).
240 National Australia Bank
Notes to the financial statements
Note 33
Related party disclosures
The Group provides a range of services to related parties including the provision of banking facilities and standby financing
arrangements. Other dealings include granting loans and accepting deposits, and the provision of finance. These transactions
are normally entered into on terms equivalent to those that prevail on an arm’s length basis in the ordinary course of business.
Other transactions with controlled entities may involve leases of properties, plant and equipment, provision of data processing
services or access to intellectual or other intangible property rights. Charges for these transactions are normally on an arm’s
length basis and are otherwise on the basis of equitable rates agreed between the parties. The Company also provides
various administrative services to the Group, which may include accounting, secretarial and legal. Fees may be charged for
these services.
Loans made to subsidiaries are generally entered into on terms equivalent to those that prevail on an arm’s length basis, except
that there are often no fixed repayment terms for the settlement of loans between parties. Outstanding balances are unsecured
and are repayable in cash.
The Company may incur costs on behalf of controlled entities in respect of customer-related remediation, regulatory activity,
compliance investigations and associated proceedings. Refer to Note 31 Commitments and contingent liabilities for further
details in respect of these matters.
Subsidiaries
The table below shows the net amounts payable to subsidiaries for the years ended 30 September:
Balance at beginning of year
Net cash outflows / (inflows)
Net foreign currency translation movements and other amounts receivable
Balance at end of year
The table below shows material transactions with subsidiaries for the years ended 30 September:
Net interest expense
Dividend revenue
Superannuation plans
Company
2023
$m
(3,413)
3,320
(389)
(482)
Company
2023
$m
(929)
7,421
The following payments were made to superannuation plans sponsored by the Group:
Payment to:
National Australia Bank Group Superannuation Fund A
Other
Group
Company
2023
$m
298
9
2022
$m
272
9
2023
$m
298
9
Transactions between the Group and superannuation plans sponsored by the Group were made on commercial terms
and conditions.
2022
$m
(83)
(3,162)
(168)
(3,413)
2022
$m
(1,344)
2,024
2022
$m
272
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2023 Annual Report
241
Notes to the financial statements
Note 33 Related party disclosures (cont.)
Key Management Personnel (KMP)
The list of the Company's KMP is assessed each year and comprises the non-executive directors of the Company, the Group CEO
(an executive director of the Company) and those employees of the Group who have authority and responsibility for planning,
directing and controlling the activities of both the Company and the Group. Details of KMP are set out in Section 7.1 and Section
8.3 of the Remuneration Report included in the Report of the Directors.
Remuneration
Total remuneration of KMP is included within total personnel expenses in Note 5 Operating expenses. The total remuneration is
as follows:
Short-term benefits
Cash salary
Variable reward cash
Non-monetary
Post-employment benefits
Superannuation
Other long-term benefits
Other long-term benefits
Equity-based benefits
Shares
Performance rights
Other
Other remuneration
Total
Group
2023
$
2022
$
18,860,539
18,587,954
8,312,680
7,996,381
172,600
272,922
578,764
532,755
200,462
182,991
489,226
1,477,224
14,955,354
13,433,135
1,742,506
-
45,312,131
42,483,362
Performance rights and shareholdings of KMP are set out in the Remuneration Report included in the Report of the Directors.
Loans to KMP and their related parties
During the 2023 financial year, loans made to KMP and other related parties of the Group and Company were $21 million (2022:
$13 million). Loans to non-executive directors of the Company are made in the ordinary course of business on terms equivalent
to those that prevail in arm's length transactions. Loans to the Group CEO and Group Executives may be made on similar terms
and conditions generally available to other employees of the Group. Loans may be secured or unsecured depending on the
nature of the lending product advanced. As at 30 September 2023, the total loan balances outstanding were $59 million (2022:
$47 million).
No amounts were written off in respect of any loans made to directors or other KMP of the Group and Company during the
current or prior reporting period.
Further details regarding loans advanced to KMP of the Group and Company are included in the Remuneration Report within the
Report of the Directors.
86 400 Transfer of banking business
On 8 December 2021, 86 400 transferred approximately $1,286 million of its banking related mortgage assets and $663 million of its
banking related deposit liabilities to the Company on an arms-length basis under the Financial Sector (Transfer and Restructure)
Act 1999 (Cth) (FSTRA). In addition, 86 400 transferred approximately $285 million of its fixed income securities portfolio, held for
liquidity purposes, to the Company on an arm’s length basis under the FSTRA. These fixed income securities were previously
measured at amortised cost as they were managed within a ‘hold to collect’ business model. Following the transfer to the
Company, these securities were reclassified to fair value through profit or loss as the revised business model is neither ‘hold to
collect’ nor ‘hold to collect and sell’. The difference between the previous amortised cost of these assets and their fair value
at the reclassification date was not material. Following these transfers 86 400 surrendered its ADI Licence to APRA and returned
approximately $144 million of share capital to the Company. On a prospective basis, 86 400 will perform various technology and
operational services to support and grow the Company's digital banking activities and business.
242 National Australia Bank
Notes to the financial statements
Note 34
Remuneration of external auditor
EY Australia
Audit services
Audit-related services
Taxation-related services
Non-audit services(1)
Total Australia
EY Overseas
Audit services
Audit-related services
Taxation-related services
Non-audit services(1)
Total Overseas
Total Australia and Overseas
Fees paid to the external auditor for services to non-consolidated entities of
the Group
Total remuneration paid to the external auditor
Group
Company
2023
$'000
12,862
5,660
50
500
2022
$'000
12,457
5,475
47
-
2023
$'000
10,527
5,303
50
500
2022
$'000
10,405
5,094
47
-
19,072
17,979
16,380
15,546
4,152
1,027
5
56
5,240
24,312
4,079
865
-
1,163
6,107
24,086
1,991
355
-
-
2,346
18,726
1,962
344
-
-
2,306
17,852
673
435
-
-
24,985
24,521
18,726
17,852
(1) The Board Audit Committee considered all non-audit services and were satisfied that these are compatible with maintaining audit independence.
Total remuneration paid to another audit firm where EY is in a joint audit arrangement for the audit of a Group subsidiary
is $104,000.
The Joint Parliamentary Committee inquiry into the Regulation of Auditing in Australia highlighted the disparity and lack of
comparability of the external auditor fee remuneration disclosure for ASX listed corporates. ASIC are proposing four categories
to define external auditor services as the basis of the proposed future disclosure requirements which are set out below.
Auditor’s remuneration - ASIC disclosures
EY Australia - consolidated entities
Audit services for the statutory financial report of the parent and any of its
controlled entities
Assurance services that are required by legislation to be provided by the
external auditor
Other assurance and agreed-upon-procedures under other legislation or
contractual arrangements
Other services
Total Australia
EY Overseas - consolidated entities
Audit services for the statutory financial report of the parent and any of its
controlled entities
Other assurance and agreed-upon-procedures under other legislation or
contractual arrangements
Other services
Total Overseas
Total Australia and Overseas
Group
Company
2023
$'000
2022
$'000
2023
$'000
2022
$'000
12,862
12,457
10,527
10,405
196
224
139
128
5,305
709
5,099
199
5,005
709
4,814
199
19,072
17,979
16,380
15,546
4,152
4,079
1,991
1,962
1,032
56
5,240
24,312
865
1,163
6,107
24,086
355
-
2,346
18,726
344
-
2,306
17,852
EY Australia and Overseas - non-consolidated entities
Other assurance and agreed-upon-procedures under other legislation or
contractual arrangements
Total remuneration paid to the external auditor
673
435
-
-
24,985
24,521
18,726
17,852
A description of the Board Audit Committee’s pre-approval policies and procedures are set out in Assurance and Control in the
Corporate Governance section and included in the Report of the Directors.
2023 Annual Report
243
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Notes to the financial statements
Note 35
Equity-based plans
Accounting policy
The value of shares and rights provided to employees are measured by reference to their grant date fair value. The grant date fair value of each share is determined by the market
value of NAB shares and is generally a five-day weighted average share price. The grant date fair value of shares and rights with market performance hurdles is determined using a
simulated version of the Black-Scholes model.
With the exception of general employee shares in Australia, the expense for each tranche of shares or rights granted is recognised in the income statement on a straight-line basis,
adjusted for forfeitures, over the vesting period for the shares or rights. The expense for general employee shares in Australia is recognised in the income statement in the year the
shares are granted as they are not subject to forfeiture. A corresponding increase is recorded in the equity-based compensation reserve.
Critical accounting judgements and estimates
The key estimates and inputs used in the Black-Scholes model vary depending on the award and type of security granted. They include the NAB share price at the time of the grant,
exercise price of the rights (which is nil), the expected volatility of NAB’s share price, the risk-free interest rate and the expected dividend yield on NAB shares for the life of the rights.
When estimating expected volatility, historic daily share prices are analysed to arrive at annual and cumulative historic volatility estimates (which may be adjusted for any abnormal
periods or non-recurring significant events). Trends in the data are analysed to estimate volatility movements in the future for use in the numeric pricing model. The simulated version
of the Black-Scholes model takes into account both the probability of achieving market performance conditions and the potential for early exercise of vested rights.
While market performance conditions are incorporated into the grant date fair values, non-market conditions are not taken into account when determining the fair value and expected
time to vesting of shares and rights. Instead, non-market conditions are taken into account by adjusting the number of shares and rights included in the measurement of the expense
so that the amount recognised in the income statement reflects the number of shares or rights that actually vest.
Under the Group’s employee equity plans, employees of the Group are awarded shares and rights. An employee’s right to participate in a plan is often dependent on their performance or the
performance of the Group, and shares and rights awarded under the plans are often subject to service and/or performance conditions.
Generally, a right entitles its holder to be allocated one share when the right vests and is exercised. However, under certain bespoke plans, a right entitles its holder to be allocated a number
of shares equal to a predetermined value on vesting and exercise of the right.
The Board determines the maximum total value of shares or rights offered under each plan having regard to the rules of the relevant plan and, where required, the method used in calculating
the fair value per security. Under ASX Listing Rules, shares and rights may not be issued to the Company's directors under an employee equity plan without specific shareholder approval.
Under the terms of most offers, there is a period during which shares are held on trust for the employee they are allocated to and cannot be dealt with, or rights granted to an employee
cannot be exercised, by that employee. There may be forfeiture or lapse conditions which apply to shares or rights allocated to an employee (as described below), including as a result of
the employee ceasing employment with the Group during those periods or conduct standards not being met. Shares allocated to employees are eligible for any cash dividends paid by the
Company on those shares from the time those shares are allocated to the trustee on their behalf. Rights granted to employees are not eligible for any cash dividends paid by the Company.
In some limited circumstances, there may be a cash dividend equivalent payment made in the event that rights vest.
The table below sets out details of the Group’s employee equity plans that are offered on a regular basis. As noted above, the Group also offers bespoke plans in certain circumstances,
including in connection with material transactions, as a retention mechanism and to encourage the achievement of certain specific business growth targets.
244 National Australia Bank
Notes to the financial statements
Note 35 Equity-based plans (cont.)
Long-term Variable
Reward (LTVR)
(Up to
30 September 2023)
LTVRs (including
prior year Long-
term Incentive (LTI)
grants) are awarded
to encourage long-
term decision-making
critical to creating
long-term value
for shareholders
through the use of
challenging long-term
performance hurdles.
Description
Variable Reward (VR)
A proportion of an
employee’s annual VR
is provided in equity
and is deferred for a
specified period. The
deferred amount and
the deferral period
is different based
on the incentive
plan participated in,
and the level of
risk, responsibility
and seniority of
the employees.
VR was referred to as
‘short-term incentive’
before the 2019
financial year.
Eligibility
Certain employees
based in Australia
and certain
overseas jurisdictions
having regard to
their individual
performance and
the performance of
the Group.
The ELT up to and
including the 2023
financial year (except
for the 2018 financial
year when no LTVRs
were awarded).
Long-term Incentive
(LTI) - LTEA & LTVR
(From 1 October 2023)
LTI consists of two
equally weighted
components:
Long-term Equity
Award (LTEA) -
Represents the non-
financial measure
component of LTI,
focused on risk. It
is awarded to ensure
risk management is
front of mind in making
long-term decisions
and encourage the
creation of safe,
sustainable growth in
shareholder value.
Long-term Variable
Reward (LTVR) -
Represents the
financial measure
component of LTI.
It is awarded
to encourage long-
term decision-making
critical to creating
long-term value
for shareholders.
The ELT from
the 2024 financial
year onwards,
subject to pre-
grant assessments
undertaken by
the Board.
General
employee shares
Shares up to a
target value of
$1,000 are offered to
eligible employees.
Annual Equity
Award (AEA)
Commencement
awards
Recognition/
Retention awards
Provided to enable
the buy-out of equity
or other incentives
from an employee’s
previous employment.
Offered to key
individuals in roles
where retention
is critical over
the medium-term
(generally between 2
and 3 years).
Annual awards of
deferred shares
under the AEA to
create shareholder
alignment, drive
continued sustainable
performance and
emphasise focus on
risk management and
good conduct and
behaviour outcomes.
Deferred shares are
subject to restrictions
and certain forfeiture
or lapsing conditions,
including forfeiture or
lapsing on resignation
from the Group, or
if conduct standards
are not met.
Certain employees
appointed to Group 5
and 6 roles based in
Australia and certain
overseas jurisdictions.
Provided on a case
by case basis, with
the recommendation
of the People
& Remuneration
Committee and the
approval of the Board.
Provided on a case
by case basis, with
the recommendation
of the People
& Remuneration
Committee and the
approval of the Board.
Permanent employees
in Australia.
2023 Annual Report
245
Notes to the financial statements
Note 35 Equity-based plans (cont.)
Type of
equity-
based
payment
Service
conditions
and
performance
hurdles
Variable Reward (VR)
Generally shares.
However, rights are
also granted for
jurisdictional reasons.
Deferred shares or
rights are forfeited
or lapsed during the
vesting period if:
•
•
•
the
employee resigns
the employee
does not meet
conduct standards
the employee's
employment with
the Group
is terminated,
subject to
certain exclusions.
Long-term Variable
Reward (LTVR)
(Up to
30 September 2023)
Long-term Incentive
(LTI) - LTEA & LTVR
(From 1 October 2023)
Annual Equity
Award (AEA)
Commencement
awards
Recognition/
Retention awards
General
employee shares
Generally shares.
However, rights are
also granted for
jurisdictional reasons.
Shares or rights are
subject to restrictions
and certain forfeiture
or lapsing conditions,
including forfeiture or
lapsing on resignation
from the Group or
if conduct standards
are not met.
Generally shares.
However, rights are
also granted for
jurisdictional reasons.
Shares or rights are
subject to restrictions
and certain forfeiture
or lapsing conditions,
including forfeiture or
lapsing on resignation
from the Group or
if conduct standards
are not met.
Shares.
Shares are subject
to restrictions on
dealing for three years
and are not subject
to forfeiture.
Performance rights.
Performance rights.
Generally shares.
Deferred shares are
subject to restrictions
and certain forfeiture
or lapsing conditions,
including forfeiture or
lapsing on resignation
from the Group, or
if conduct standards
are not met.
During the vesting
period, all of
an executive’s
performance rights
will lapse on
the executive’s
resignation from the
Group. Performance
rights will also lapse
if conduct standards
or performance
hurdles are not
met. The Board has
absolute discretion
to determine
vesting or lapsing
outcomes for the
performance rights.
During the
performance period
and post-vesting
deferral period, all
of an executive’s
performance rights
will lapse on
the executive’s
resignation from
the Group.
Performance rights
will also lapse if
risk management,
conduct standards
or performance
hurdles are not
met. The Board has
absolute discretion
to determine
vesting or lapsing
outcomes for the
performance rights.
246 National Australia Bank
Notes to the financial statements
Note 35 Equity-based plans (cont.)
Variable Reward (VR)
Defined period which
differs based on the
VR plan participated
in and the employee's
seniority. The period
aligns with the level
of risk, impact of
the role on business
performance and
results and regulatory
requirements. The
vesting period will
generally be between 1
and 7 years.
If the applicable
conditions are met,
deferred rights will
vest and each right will
be automatically
exercised.
n/a for share grants.
Vesting,
performance
or deferral
period
Exercise
period (only
applicable for
rights)
Board
discretion
Long-term Variable
Reward (LTVR)
(Up to
30 September 2023)
Defined period set
at time of grant,
generally between 4
and 5 years.
Long-term Incentive
(LTI) - LTEA & LTVR
(From 1 October 2023)
Defined performance
period of 4 years,
followed by a further
2 years (for CEO) or
1 year (all other ELT)
restriction period.
A risk and conduct
assessment will be
undertaken by the
Board prior to vesting.
Annual Equity
Award (AEA)
Commencement
awards
Recognition/
Retention awards
General
employee shares
Defined period set at
time of grant. Deferred
Shares vest in equal
tranches over 3 years.
Defined period set
at time of grant,
based on satisfactory
evidence of foregone
awards from
previous employment.
Defined period set at
time of grant.
3 years.
Performance rights
will be automatically
exercised if they vest.
Performance rights
will be automatically
exercised if they vest.
n/a
If the applicable
conditions are met,
rights will vest and
each right will be
automatically
exercised.
If the applicable
conditions are met,
rights will vest and
each right will be
automatically
exercised.
n/a for share grants.
n/a for share grants.
The Board regularly reviews Group performance for risk, reputation, conduct and performance considerations and has the ability to:
•
•
Extend the vesting, performance or deferral period beyond the original period for the ELT, other Accountable Persons and, in certain circumstances,
other employees.
Forfeit or lapse the deferred shares or rights.
• Clawback the deferred shares or rights from the ELT, other Accountable Persons and in certain circumstances, other employees.
In addition, the Board generally has discretion to determine the treatment of unvested shares and rights at the time a change of control event occurs.
Vesting of shares and rights will not be automatic or accelerated and the Board will retain discretion in relation to the vesting outcome including absolute
discretion to forfeit all shares and rights.
n/a
n/a
2023 Annual Report
247
Notes to the financial statements
Note 35 Equity-based plans (cont.)
Employee share plan
Employee share plans
Variable reward deferred shares
Commencement and recognition shares
General employee shares
Annual Equity Award shares
2023
2022
Fully paid
ordinary shares
granted during
the year
No.
2,666,264
235,641
747,328
771,935
Weighted average
grant date
fair value
$
30.60
30.23
30.71
29.11
Fully paid
ordinary shares
granted during
the year
No.
3,309,953
889,923
747,285
453,216
Weighted average
grant date
fair value
$
28.99
29.12
28.39
30.09
The closing market price of NAB shares as at 30 September 2023 was $29.07 (2022: $28.81). The volume weighted average share price during the year ended 30 September 2023 was $28.86
(2022: $29.44).
Rights movements
Number of rights
Opening balance as at 1 October
Granted(1)
Forfeited(1)
Exercised
Closing balance as at 30 September
Exercisable as at 30 September
2023
2022
2,935,432
1,194,372
(116,286)
(166,898)
3,846,620
-
2,645,771
1,029,947
(405,781)
(334,505)
2,935,432
-
(1) Where rights have been allocated or forfeited to a predetermined value, the total number granted or forfeited has been estimated using a share price of $28.86, being the volume weighted average share price of NAB shares during the financial year
ended 30 September 2023 (2022: $29.44).
Terms and conditions
Market hurdle
Non-market hurdle(1)
Individual hurdle(1)
2023
2022
Outstanding at
30 Sep
Weighted average
remaining life
Outstanding at
30 Sep
Weighted average
remaining life
No.
months
No.
months
2,867,981
211,210
767,429
23
8
17
2,140,396
361,180
433,856
32
21
23
(1) Where rights have been allocated or forfeited to a predetermined value, the total number granted or forfeited has been estimated using a share price of $28.86, being the volume weighted average share price of NAB shares during the financial year
ended 30 September 2023 (2022: $29.44).
248 National Australia Bank
Notes to the financial statements
Note 35 Equity-based plans (cont.)
Information on fair value calculation
The table below shows the significant assumptions used as inputs into the grant date fair value calculation of rights granted during each of the last two years. In the following table, values
have been presented as weighted averages, but the specific values for each grant are used for the fair value calculation. The table also shows a ‘no hurdle’ value for rights that do not have
any market-based performance hurdles attached. The 'no hurdle' value is calculated as the grant date fair value of the rights, and in most instances is adjusted for expected dividends over
the vesting period.
Weighted average values
Contractual life (years)
Risk-free interest rate (per annum) (%)
Expected volatility of share price (%)
Closing share price on grant date ($)
Dividend yield (per annum) (%)
Fair value of rights with a market hurdle ($)
Fair value of rights without a market hurdle ($)
Expected time to vesting (years)
2023
3.3
3.45
31
30.12
5.00
11.62
27.35
3.18
2022
3.5
1.61
30
28.81
4.93
17.30
23.41
3.30
2023 Annual Report
249
Notes to the financial statements
Note 36
Capital adequacy
As an ADI, the Company is subject to regulation by APRA under the authority of the Banking Act 1959 (Cth). APRA has set minimum
Prudential Capital Requirements (PCR) for ADIs consistent with the Basel Committee on Banking Supervision capital adequacy
framework. PCR are expressed as a percentage of total RWA. APRA requirements are summarised below:
CET1 capital
Tier 1 capital
Total capital
CET1 capital ranks behind the claims
of depositors and other creditors in
the event of winding-up of the issuer,
absorbs losses as and when they
occur, has full flexibility of dividend
payments and has no maturity date.
CET1 capital consists of the sum
of paid-up ordinary share capital,
retained profits plus certain other
items as defined in APS 111 Capital
Adequacy: Measurement of Capital.
CET1 capital plus AT1 capital. AT1
capital comprises high quality components
of capital that satisfy the following
essential characteristics:
• provide a permanent and unrestricted
commitment of funds
• are freely available to absorb losses
•
rank behind the claims of depositors and
other more senior creditors in the event
of winding up of the issuer
• provide for fully discretionary
capital distributions.
Tier 1 capital plus Tier 2 capital. Tier 2
capital comprises other components of
capital that, to varying degrees, do not
meet the requirements of Tier 1 capital
but nonetheless contribute to the overall
strength of an ADI and its capacity to
absorb losses.
Reporting levels
Regulatory capital requirements are measured on a Level 1 and Level 2 basis. Level 1 comprises the Company and Extended
Licenced Entities approved by APRA. Level 2 comprises the Company and the entities it controls, excluding securitisation special
purpose vehicles (SPVs) to which assets have been transferred in accordance with the requirements for regulatory capital relief
in APS 120 Securitisation and funds management entities.
APRA minimum requirements
APRA’s revised capital framework has applied since 1 January 2023. Under this framework, APRA’s minimum PCR as a percentage of
the ADI’s total RWA are: 4.5% of RWA for CET1 capital, 6% for Tier 1 capital and 8% for Total capital.
An ADI must hold a capital conservation buffer above the PCR for CET1 capital. The capital conservation buffer is 3.75% of the ADI’s
total RWA. As a D-SIB in Australia, the Group is also required to hold an additional buffer of 1% in CET1 capital.
In addition, APRA requires the Group to hold a countercyclical capital buffer set on a jurisdictional basis, with a default setting of
1% for Australia.
APRA may determine higher PCRs for an ADI and may change an ADI’s PCRs at any time. A breach of the required ratios under APRA's
prudential standards may trigger legally enforceable directions by APRA, which can include a direction to raise additional capital.
Capital Management
The Group’s capital management strategy is focused on adequacy, efficiency and flexibility. The capital adequacy objective
seeks to ensure sufficient capital is held in excess of regulatory requirements, and within the Group’s balance sheet risk
appetite. This approach is consistent across the Group’s subsidiaries.
Capital ratios are monitored against operating targets that are set by the Board above minimum capital requirements set
by APRA.
The Group’s capital ratio operating targets are regularly reviewed in the context of the external economic and regulatory outlook
with the objective of maintaining balance sheet strength.
From 1 January 2023, the Group’s CET1 target range moved to 11.00-11.50% to align with the new calculation methodology under
APRA’s revised capital framework.
250 National Australia Bank
Notes to the financial statements
Note 37
Notes to the statement of cash flows
Reconciliation of net profit attributable to owners the Company to net cash provided by / (used in) operating activities
Net profit attributable to owners of the Company
Add / (deduct) non-cash items in the income statement:
(Increase) in interest receivable
Increase in interest payable
Increase in unearned income and deferred net fee income
Fair value movements on assets, liabilities and derivatives held at
fair value
Increase in provisions
Equity-based compensation recognised in equity or reserves
Superannuation costs - defined benefit plans
Impairment losses on non-financial assets
Impairment losses on financial assets
Credit Impairment write-back
Depreciation and amortisation expense
(Increase) / decrease in other assets
Increase / (decrease) in other liabilities
Increase in income tax payable
(Increase) / decrease in deferred tax assets
Increase / (decrease) in deferred tax liabilities
Group
Company
2023
$m
7,414
(1,086)
2,717
381
3,482
834
131
(2)
13
-
895
1,214
150
(293)
77
(109)
8
2022
$m
6,891
(981)
994
166
4,299
1,341
113
-
10
1
194
1,112
84
280
659
352
(13)
2023
$m
12,012
(995)
2,339
419
2,879
813
131
(2)
14
-
727
927
(5,430)
(8)
289
(134)
11
2022
$m
5,945
(922)
843
159
4,389
1,242
113
-
18
-
110
871
233
48
610
307
20
Operating cash flow items not included in profit
(42,474)
13,170
(39,141)
14,868
Investing or financing cash flows included in profit
(Gain) on sale of controlled entities, before income tax
(Gain) on sale of other debt and equity instruments
(Gain) / loss on sale of property, plant, equipment and other assets
(29)
(32)
10
(197)
(199)
(55)
(29)
(32)
(1)
-
(199)
(74)
Net cash provided by / (used in) operating activities
(26,699)
28,221
(25,211)
28,581
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Notes to the financial statements
Note 37 Notes to the statement of cash flows (cont.)
Reconciliation of liabilities arising from financing activities
Group
Company
Bonds‚ notes and
subordinated debt
Debt
issues
Lease
liabilities
Bonds‚ notes and
subordinated debt
Debt
issues
Lease
liabilities
At fair
value
$m
18,416
1,500
(3,280)
At
amortised
cost
$m
109,154
At fair
value
$m
5,570
At
amortised
cost
$m
102,501
$m
6,831
$m
1,967
$m
6,831
$m
1,659
40,432
(24,359)
1,983
-
(1,504)
(339)
268
(742)
34,919
(23,577)
1,983
-
(1,504)
(299)
Balance at 1 October 2021
Cash flows
Proceeds from issue
Repayments
Non-cash changes
Additions to lease liabilities
-
-
Fair value changes, including
fair value hedge adjustments
Foreign currency translation
and other adjustments
(1,497)
(7,718)
(78)
1,774
-
-
8
631
-
-
-
(900)
(5,371)
(21)
283
1,202
-
-
8
617
-
1
Balance as at
30 September 2022
Cash flows
Proceeds from issue
Repayments
Non-cash changes
Additions to lease liabilities
Fair value changes, including
fair value hedge adjustments
Foreign currency translation
and other adjustments
Balance as at
30 September 2023
15,061
119,283
7,318
2,238
4,479
109,674
7,318
1,978
1,466
(3,325)
41,361
(27,819)
-
(99)
638
-
(817)
3,637
1,243
-
-
-
-
-
(328)
78
(93)
38,870
(26,844)
333
-
-
-
16
(159)
(623)
66
3,252
1,243
-
-
-
-
-
(284)
120
-
2
13,741
135,645
8,561
2,259
4,371
124,329
8,561
1,816
252 National Australia Bank
Notes to the financial statements
Note 37 Notes to the statement of cash flows (cont.)
Reconciliation of cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents includes cash and liquid assets and amounts due from
other banks (including reverse repurchase agreements and short-term government securities) net of amounts due to other
banks that are readily convertible to known amounts of cash within three months.
Cash and cash equivalents as shown in the cash flow statement is reconciled to the related items on the balance sheet
as follows:
Assets
Cash and liquid assets
Treasury and other eligible bills
Due from other banks (excluding mandatory deposits with supervisory
central banks)
Total cash and cash equivalent assets
Liabilities
Due to other banks
Total cash and cash equivalents
Non-cash investing activities
Group
Company
2023
$m
2022
$m
2023
$m
2022
$m
24,699
56,451
23,959
56,121
53
505
-
-
28,114
52,866
38,822
95,778
17,772
41,731
30,142
86,263
(12,277)
(33,599)
(9,950)
(31,080)
40,589
62,179
31,781
55,183
In the 2023 financial year, the Company received a dividend of $5.4 billion from National Equities Limited (following a dividend
payment by BNZ) which was reinvested into additional ordinary shares. These transactions were settled on a net basis and no
cash was transferred. As these are transactions between entities within the Group they are eliminated in full upon consolidation.
Non-cash financing activities
Shares issued under the Dividend Reinvestment Plan
There was no DRP discount on dividends paid in the 2023 financial year (2022: $nil).
Group
Company
2023
$m
693
2022
$m
500
2023
$m
693
2022
$m
500
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Notes to the financial statements
Note 38
Acquisition of subsidiaries
Acquisition of Citigroup's Australian consumer business - 1 June 2022
On 1 June 2022, the Company completed the acquisition of the Citi consumer business, including its home lending portfolio,
unsecured lending business (personal loans and credit cards), retail deposits business and private wealth management
business. The acquisition qualified as a business combination as defined in AASB 3 Business Combinations.
The acquisition was undertaken to support NAB’s ambition to build a leading personal bank with a simpler, more
digital experience.
The net assets recognised in the 2022 financial year were recorded on a provisional basis using preliminary completion accounts
and a draft purchase price allocation. During the 2023 financial year the final completion payment was made and the purchase
price allocation was finalised.
The final fair values of the assets and liabilities are summarised in the table below:
Consideration
Total cash consideration for the acquisition
Assets and liabilities acquired
Loans and advances
Other assets
Total assets
Deposits and other borrowings
Other liabilities
Total liabilities
Net assets
Goodwill and other intangible assets
Goodwill
Intangible assets
Group
$m
3,135
12,832
523
13,355
9,488
732
10,220
3,135
248
80
168
The most significant adjustments to the provisional amounts disclosed in the 2022 Annual Report are in relation to a $19 million
increase in net deferred tax assets recognised and a $3 million decrease in intangible assets.
The final goodwill value of $80 million is supported by the scale and expertise in unsecured lending acquired, together with
anticipated synergies. Other intangible assets comprise customer relationships and core deposits.
The goodwill has been allocated to the Personal Banking CGU (refer to Note 22 Goodwill and other intangible assets).
Note 39
Events subsequent to reporting date
There are no items, transactions or events of a material or unusual nature that have arisen in the interval between 30 September
2023 and the date of this report that, in the opinion of the directors, have significantly affected or may significantly affect the
operations of the Group, the results of those operations or the state of affairs of the Group in future years.
254 National Australia Bank
Directors' declaration
The directors of National Australia Bank Limited declare that:
(a) in the opinion of the directors, the financial statements and notes for the year ended 30 September 2023, as set out on pages
159 to 254, are in accordance with the Corporations Act 2001 (Cth), including:
i) in compliance with Australian Accounting Standards (including Australian Accounting Interpretations), International Financial
Reporting Standards as stated in Note 1 Basis of preparation, and any further requirements of the Corporations Regulations
2001; and
ii) give a true and fair view of the financial position of the Company and the Group as at 30 September 2023, and of the
performance of the Company and the Group for the year ended 30 September 2023.
(b) in the opinion of the directors, there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable.
(c) the directors have been given the declarations required by section 295A of the Corporations Act 2001 (Cth) for the year ended
30 September 2023.
Signed in accordance with a resolution of the directors.
Philip Chronican
Chair
9 November 2023
Ross McEwan CBE
Group Chief Executive Officer
9 November 2023
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A member firm of Ernst & Young Global LimitedLiability limited by a scheme approved under Professional Standards LegislationErnst & Young8 Exhibition StreetMelbourne VIC 3000 AustraliaGPO Box 67 Melbourne VIC 3001Tel: +61 3 9288 8000Fax: +61 3 8650 7777ey.com/auIndependent Auditor’s Report to the Members of NationalAustralia Bank LimitedReport on the audit of the Financial ReportOpinionWe have audited the Financial Report of National Australia Bank Limited (the Company) and itssubsidiaries (collectively the Group), which comprises:►The Group consolidated and Company Balance sheets as at 30 September 2023;►The Group consolidated and Company income statements, statements of comprehensive income,statements of cash flows and statements of changes in equity for the year then ended;►Notes to the financial statements, including a summary of significant accounting policies; and►The Directors’ declaration.In our opinion, the accompanying Financial Report is in accordance with theCorporations Act 2001,including:a.Giving a true and fair view of the Company’s and the Group’s financial position as at 30 September2023 and of their financial performance for the year ended on that date; andb.Complying with Australian Accounting Standards and theCorporations Regulations 2001.Basis for opinionWe conducted our audit in accordance with Australian Auditing Standards. Our responsibilities underthose standards are further described in theAuditor’s responsibilities for the audit of the FinancialReport section of our report. We are independent of the Group in accordance with the auditorindependence requirements of theCorporations Act 2001 and the ethical requirements of theAccounting Professional and Ethical Standards Board’s APES 110Code of Ethics for ProfessionalAccountants (including Independence Standards) (the Code) that are relevant to our audit of theFinancial Report in Australia. We have also fulfilled our other ethical responsibilities in accordancewith the Code.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our opinion.Key audit mattersKey audit matters are those matters that, in our professional judgment, were of most significance inour audit of the Financial Report of the current year. These matters were addressed in the context ofour audit of the Financial Report as a whole, and in forming our opinion thereon, but we do notprovide a separate opinion on these matters. For each matter below, our description of how our auditaddressed the matter is provided in that context. The key audit matters identified below, unlessotherwise stated, relate to both the Company and the Group. i
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A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the Financial Report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying Financial Report. Why significant How our audit addressed the key audit matter Provision for credit impairment As at 30 September 2023 the Group has a provision for credit impairment of $5,585 million as disclosed in Note 17 Provision for credit impairment on loans at amortised cost. The provision for credit impairment is measured in accordance with the requirements of Australian Accounting Standard – AASB 9 Financial Instruments (AASB 9). Key areas of significant judgment included: the application of the impairment requirements of AASB 9 within the expected credit loss methodology; the identification of exposures with a significant increase in credit risk; assumptions used in the expected credit loss model (for exposures assessed on an individual or collective basis); and the incorporation of forward-looking information to reflect current and anticipated future external factors, both in the multiple economic scenarios and the probability weighting determined for each of these scenarios. This was a key audit matter due to the value of the provision, and the degree of judgment and estimation uncertainty associated with the provision calculation. Our audit procedures included the following: We assessed the alignment of the Group’s expected credit loss model and its underlying methodology against the requirements of AASB 9. In conjunction with our actuarial and economic specialists, we assessed the following for exposures evaluated on a collective basis: significant modelling and macroeconomic assumptions, including the reasonableness of forward-looking information and scenarios; the determination and assessment of significant increase in credit risk; sensitivity of collective provisions to changes in modelling assumptions; the mathematical accuracy of management’s model; and the basis for and data used to determine forward looking adjustments. We assessed a sample of exposures on an individual basis by: assessing the reasonableness and timeliness of internal credit quality assessments based on the borrowers’ particular circumstances; and evaluating the associated provisions by assessing the reasonableness of key inputs into the credit impairment calculation, with particular focus on high-risk industries, work out strategies, collateral values, and the value and timing of recoveries. In conjunction with our IT specialists, we assessed the effectiveness of relevant controls relating to the: capture of data, including loan origination and transactional data, ongoing internal credit quality assessments, storage of data in data warehouses, and interfaces with the models; and expected credit loss models, including functionality, ongoing monitoring/validation and model governance. We assessed the processes used to identify and evaluate climate-related risks associated with the provision for credit impairment. We assessed the adequacy of the disclosures related to credit impairment within the Notes to the financial statements.
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Why significant How our audit addressed the key audit matter Impairment assessment of goodwill The Group has recognised goodwill of $2,070 million on its balance sheet as at 30 September 2023. During the year, the purchase price allocation for the acquisitions of Citigroup’s Australian consumer business (Citi consumer business) was finalised. As disclosed in Note 22 Goodwill and other intangible assets, the Group performs an annual impairment assessment, or more frequently if there is an indication that goodwill may be impaired. This involves a comparison of the carrying value of the cash generating unit (CGU) to which the goodwill has been attributed with its recoverable amount. The recoverable amount was determined using a value in use basis (VIU) for all CGUs. The determination of VIU incorporated a range of key assumptions, including: future cash flows; discount rate; and terminal growth rate. The impairment assessment of goodwill was a key audit matter due to the degree of estimation uncertainty associated with the assumptions applied in the impairment assessment. Our audit procedures included the following: We assessed whether the VIU calculation methodology used by the Group for the impairment assessment of goodwill was in accordance with the requirements of Australian Accounting Standards. We assessed the appropriateness of the CGUs identified to which goodwill has been allocated. We agreed the forecast cash flows to the most recent Board or management approved cash flow forecasts and assessed the historical accuracy of the forecasts by performing a comparison of recent forecasts to actual results. We involved our valuation specialists to assess, with reference to comparable companies, the key assumptions used in the impairment assessment, including future cash flow forecasts, discount rates and terminal growth rates, and to test the mathematical accuracy of the impairment models. We assessed the Group’s current market capitalisation against the recoverable amount implied by the Group’s VIU calculation and benchmarked the implied valuation multiples to comparable company valuation multiples. We assessed the adequacy of the disclosures related to the impairment assessment of goodwill within the Notes to the financial statements. i
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A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Why significant How our audit addressed the key audit matter Information Technology (IT) systems and controls over financial reporting A significant part of the financial reporting process is primarily reliant on IT systems with automated processes and controls relating to the capture, storage and extraction of a high volume of information. A fundamental component of these IT systems and controls is ensuring that risks relating to inappropriate user access management, unauthorised program changes and IT operating protocols are addressed. This was identified as a key audit matter as our audit approach is dependent on the effective operation of the IT controls. Our audit procedures included the following: We focused on those IT systems and controls that are significant to the financial reporting process. We involved our IT specialists, as audit procedures over IT systems and controls require specific expertise. We assessed the design, implementation, and operating effectiveness of IT controls, including those related to: General security settings and authentication User access management and revalidation Change and release management IT operations Where we identified design and/or operating deficiencies in the IT control environment, our audit procedures included the following: we assessed the integrity and reliability of the systems and data related to financial reporting; and where automated procedures were supported by systems with identified deficiencies, we either 1) assessed compensating or mitigating controls that were not reliant on the IT control environment, 2) performed direct testing of IT application controls and/or IT dependent manual controls, or 3) varied the nature, timing and extent of substantive procedures performed.
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Information other than the Financial Report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2023 Annual Report, but does not include the Financial Report and our auditor’s report thereon. Our opinion on the Financial Report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The Directors of the Company are responsible for the preparation of the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the Financial Report, the Directors are responsible for assessing the Company’s and Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Financial Report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ► Identify and assess the risks of material misstatement of the Financial Report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. i
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A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation ► Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s or the Group’s internal control. ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. ► Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Financial Report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company or the Group to cease to continue as a going concern. ► Evaluate the overall presentation, structure and content of the Financial Report, including the disclosures, and whether the Financial Report represents the underlying transactions and events in a manner that achieves fair presentation. ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Financial Report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the Directors, we determine those matters that were of most significance in the audit of the Financial Report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 115 to 154 of the directors’ report for the year ended 30 September 2023. In our opinion, the Remuneration Report of National Australia Bank Limited for the year ended 30 September 2023, complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young T M Dring Partner Melbourne 9 November 2023 i
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Additional information
Shareholder information
Ordinary shares
Twenty largest registered fully paid ordinary shareholders of the Company as at 12 October 2023
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD DEUTSCHE BANK TCA
NETWEALTH INVESTMENTS LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
ARGO INVESTMENTS LIMITED
BNP PARIBAS NOMS (NZ) LTD
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
NATIONAL NOMINEES LIMITED
NAVIGATOR AUSTRALIA LTD
NULIS NOMINEES (AUSTRALIA) LIMITED
IOOF INVESTMENT SERVICES LIMITED
BKI INVESTMENT COMPANY LIMITED
Total
Substantial shareholders
Number of
shares
781,134,305
494,826,750
265,695,811
82,304,621
52,559,781
42,493,694
30,961,117
20,132,920
15,027,858
14,387,848
14,072,289
9,361,385
5,934,685
5,594,998
5,042,859
3,870,904
3,408,960
3,377,780
3,241,846
3,238,000
% of total
shares
24.96
15.81
8.49
2.63
1.68
1.36
0.99
0.64
0.48
0.46
0.45
0.30
0.19
0.18
0.16
0.12
0.11
0.11
0.10
0.10
1,856,668,411
59.32
The following organisations have disclosed a substantial shareholding notice to ASX. As at 12 October 2023, the Company has
received no further update in relation to these substantial shareholdings.
Name
BlackRock Group(1)
State Street Corporation(2)
The Vanguard Group, Inc(3)
(1) Substantial shareholding as at 18 March 2020, as per notice lodged on 20 March 2020.
(2) Substantial shareholding as at 12 May 2023, as per notice lodged on 16 May 2023.
(3) Substantial shareholding as at 1 February 2022, as per notice lodged on 4 February 2022.
Distribution of fully paid ordinary shareholdings
Number of
shares
177,651,034
163,528,467
162,322,845
% of
voting
power
6.02%
5.21%
5.00%
Range (number)
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Less than marketable parcel of $500
Voting rights
Number of
shareholders
% of
holders
Number of
shares
% of
shares
349,348
181,788
32,947
19,619
444
584,146
15,823
59.80
31.12
5.64
3.36
0.08
121,187,336
414,297,940
229,913,635
395,788,949
1,967,761,067
100
3,128,948,927
108,757
3.87
13.24
7.35
12.65
62.89
100
Each ordinary shareholder present at a general meeting (whether in person or by proxy or representative) is entitled to one vote
on a show of hands or, on a poll, one vote for each fully paid ordinary share held. Holders of partly paid shares voting on a poll are
entitled to a number of votes based upon the proportion that the amount of capital call and paid up on the shares bears to the
total issue price of the shares.
264 National Australia Bank
Shareholder information (cont.)
NAB Capital Notes 3 (NCN 3)
Twenty largest holders of NCN 3 as at 12 October 2023
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
NATIONAL NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
NULIS NOMINEES (AUSTRALIA) LIMITED
MUTUAL TRUST PTY LTD
NAVIGATOR AUSTRALIA LTD
DIMBULU PTY LTD
BNP PARIBAS NOMINEES PTY LTD
CAPI PTY LTD
INVIA CUSTODIAN PTY LIMITED
IOOF INVESTMENT SERVICES LIMITED
WILLIMBURY PTY LTD
BNP PARIBAS NOMINEES PTY LTD
JDB SERVICES PTY LTD
BALMORAL FINANCIAL INVESTMENTS PTY LTD
Total
Distribution of NCN 3 holdings
Range (number)
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Less than marketable parcel of $500
Voting rights
Number of
securities
% of total
securities
3,283,631
1,113,484
986,921
353,201
232,264
186,681
164,145
158,444
128,740
125,800
118,557
108,500
100,301
90,000
75,325
70,561
65,609
53,588
53,429
50,277
17.52
5.94
5.27
1.88
1.24
1.00
0.88
0.85
0.69
0.67
0.63
0.58
0.54
0.48
0.40
0.38
0.35
0.29
0.29
0.27
7,519,458
40.15
Number of
security
holders
% of
holders
Number of
securities
% of
securities
14,966
1,758
145
68
14
16,951
6
88.29
10.37
0.86
0.40
0.08
100
5,324,547
3,727,016
1,083,175
1,545,475
7,060,369
18,740,582
12
28.41
19.89
5.78
8.25
37.67
100
In accordance with their terms of issue, holders of NCN 3 have no right to vote at any general meeting of the Company prior to
conversion into NAB ordinary shares.
If NCN 3 is converted into NAB ordinary shares in accordance with their terms of issue, then voting rights will be as outlined on
page 264 of this Additional information section for NAB ordinary shares.
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2023 Annual Report
265
Shareholder information (cont.)
NAB Capital Notes 5 (NCN 5)
Twenty largest holders of NCN 5 as at 12 October 2023
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
NETWEALTH INVESTMENTS LIMITED
BNP PARIBAS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED <143212 NMMT LTD A/C>
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
NAVIGATOR AUSTRALIA LTD
LEDA HOLDINGS PTY LTD
NULIS NOMINEES (AUSTRALIA) LIMITED
MUTUAL TRUST PTY LTD
VALTELLINA PROPERTIES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
JOHN E GILL TRADING PTY LTD
AM & EM NEXT GEN PTY LTD
DIMBULU PTY LTD
NATIONAL NOMINEES LIMITED
BOND STREET CUSTODIANS LIMITED
NAVIGATOR AUSTRALIA LTD
Total
Distribution of NCN 5 holdings
Range (number)
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Less than marketable parcel of $500
Voting rights
Number of
securities
% of total
securities
2,128,550
1,666,366
610,183
445,753
378,025
261,889
226,434
192,143
161,216
154,000
142,352
138,615
129,200
126,151
107,866
105,000
100,000
90,822
88,736
75,828
8.92
6.98
2.56
1.87
1.58
1.10
0.95
0.81
0.68
0.65
0.60
0.58
0.54
0.53
0.45
0.44
0.42
0.38
0.37
0.32
7,329,129
30.73
Number of
security
holders
% of
holders
Number of
securities
% of
securities
20,936
2,679
172
97
17
23,901
6
87.59
11.21
0.72
0.41
0.07
100
7,822,240
5,555,668
1,239,406
2,269,263
6,973,103
23,859,680
16
32.78
23.29
5.19
9.51
29.23
100
In accordance with their terms of issue, holders of NCN 5 have no right to vote at any general meeting of the Company prior to
conversion into NAB ordinary shares.
If NCN 5 is converted into NAB ordinary shares in accordance with their terms of issue, then voting rights will be as outlined on
page 264 of this Additional information section for NAB ordinary shares.
266 National Australia Bank
Shareholder information (cont.)
NAB Capital Notes 6 (NCN 6)
Twenty largest holders of NCN 6 as at 12 October 2023
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
NETWEALTH INVESTMENTS LIMITED
NATIONAL NOMINEES LIMITED
NETWEALTH INVESTMENTS LIMITED
MUTUAL TRUST PTY LTD
BNP PARIBAS NOMINEES PTY LTD
TANDOM PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
DIMBULU PTY LTD
ELMORE HOLDINGS PTY LIMITED
IOOF INVESTMENT SERVICES LIMITED
FAMILY ENDEAVOURS PTY LTD
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
PESUTU PTY LTD
JOHN E GILL TRADING PTY LTD
ELPHINSTONE HOLDINGS PTY LIMITED
NAVIGATOR AUSTRALIA LTD
Total
Distribution of NCN 6 holdings
Range (number)
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Less than marketable parcel of $500
Voting rights
Number of
securities
% of total
securities
5,219,123
1,487,321
1,158,542
459,914
285,016
140,029
128,672
118,649
103,223
100,192
89,170
50,000
50,000
48,531
48,500
45,041
43,729
37,217
36,012
34,371
26.10
7.44
5.79
2.30
1.43
0.70
0.64
0.59
0.52
0.50
0.45
0.25
0.25
0.24
0.24
0.23
0.22
0.19
0.18
0.17
9,683,252
48.43
Number of
security
holders
% of
holders
Number of
securities
% of
securities
13,012
1,740
110
79
11
14,952
2
87.02
11.64
0.74
0.53
0.07
100
4,636,755
3,652,671
824,229
1,685,664
9,200,681
20,000,000
4
23.18
18.26
4.12
8.43
46.01
100
In accordance with their terms of issue, holders of NCN 6 have no right to vote at any general meeting of the Company prior to
conversion into NAB ordinary shares.
If NCN 6 is converted into NAB ordinary shares in accordance with their terms of issue, then voting rights will be as outlined on
page 264 of this Additional information section for NAB ordinary shares.
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2023 Annual Report
267
Shareholder information (cont.)
NAB Capital Notes 7 (NCN 7)
Twenty largest holders of NCN 7 as at 12 October 2023
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
CITICORP NOMINEES PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
HIGHAM HILL PTY LTD
DIMBULU PTY LTD
MR JOHN WILLIAM CUNNINGHAM
BNP PARIBAS NOMINEES PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
PARKYN CAPITAL PTY LTD
MUTUAL TRUST PTY LTD
2 KINANE STREET PTY LTD
GILLIES FAMILY HOLDINGS PTY LTD
POPEYE TREASURES PTY LTD
KADOO PTY LIMITED
CORP OF THE TSTEES OF THE ROMAN CATH ARC
MR TETSUO KAWAI
NATIONAL NOMINEES LIMITED
CERTANE CT PTY LTD
Total
Distribution of NCN 7 holdings
Range (number)
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Less than marketable parcel of $500
Voting rights
Number of
securities
% of total
securities
1,737,591
13.90
540,548
489,503
170,097
106,802
100,000
90,680
83,060
59,416
58,614
55,000
46,104
36,280
34,190
30,220
30,128
30,000
29,000
28,445
25,000
4.32
3.92
1.36
0.85
0.80
0.73
0.66
0.48
0.47
0.44
0.37
0.29
0.27
0.24
0.24
0.24
0.23
0.23
0.20
3,780,678
30.24
Number of
security
holders
% of
holders
Number of
securities
% of
securities
9,295
1,505
128
78
6
11,012
-
84.41
13.67
1.16
0.71
0.05
100
3,536,895
3,258,170
899,972
1,760,422
3,044,541
12,500,000
-
28.30
26.07
7.20
14.08
24.35
100
In accordance with their terms of issue, holders of NCN 7 have no right to vote at any general meeting of the Company prior to
conversion into NAB ordinary shares.
If NCN 7 is converted into NAB ordinary shares in accordance with their terms of issue, then voting rights will be as outlined on
page 264 of this Additional information section for NAB ordinary shares.
268 National Australia Bank
Shareholder information (cont.)
Official quotation
Fully paid ordinary shares of the Company are quoted on the ASX.
The Group has also issued:
• NAB Capital Notes 3, NAB Capital Notes 5, NAB Capital Notes 6, NAB Capital Notes 7, covered bonds and residential mortgage
backed securities which are quoted on the ASX.
• Medium-term notes, subordinated notes and covered bonds which are quoted on the Luxembourg Stock Exchange.
• Medium-term notes and perpetual preference shares which are quoted on the NZX Debt Market.
• Medium-term notes and covered bonds which are quoted on the SIX Swiss Exchange.
• Medium-term notes which are quoted on the Taipei Exchange.
Unquoted securities
NAB has the following unquoted securities on issue as at 31 October 2023:
• 8,950 partly paid ordinary shares, of which there are 13 holders
• 3,635,434 rights, of which there are 65 holders (refer to page 114 of this report for further details).
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2023 Annual Report
269
Principal Share Register
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
ABBOTSFORD VIC 3067
Australia
Postal address:
GPO Box 2333
MELBOURNE VIC 3001
Australia
Local call: 1300 367 647
Fax: +61 3 9473 2500
Telephone and fax (outside Australia):
Tel: +61 3 9415 4299; Fax: +61 3 9473 2500
Email: nabservices@computershare.com.au
Website: www.investorcentre.com/au
United Kingdom Share Register
Computershare Investor Services plc
The Pavilions
Bridgwater Road BRISTOL BS99 6ZZ
United Kingdom
Tel: +44 370 703 0197
Fax: +44 370 703 6101
Email: nabgroup@computershare.co.uk
Website: www.investorcentre.com/au
United States ADR Depositary, Transfer Agent and Registrar
contact details for NAB ADR holders:
Deutsche Bank Shareholder Services
American Stock Transfer & Trust Company Operations Center
6201 15th Avenue
Brooklyn, NY 11219
USA
Toll-free number: +1 866 706 0509
Direct Dial: +1 718 921 8137
Email: db@amstock.com
Contact details for NAB ADR brokers &
institutional investors:
US Tel: +1 212 250 9100
UK Tel: +44 207 547 6500
Email: adr@db.com
Chair
Mr Philip Chronican
BCom (Hons), MBA (Dist), GAICD, SF Fin
Group Chief Executive Officer and Managing Director
Mr Ross McEwan CBE
BBus
Group Chief Financial Officer
Mr Nathan Goonan
BCom, BAgrSc (Hons)
Registered office
Level 28
395 Bourke Street
MELBOURNE VIC 3000
Australia
Tel: 1300 889 398
Tel: +61 3 8615 3064
International locations
nab.com.au/corporate/global-relationships
Auditor
Ernst & Young
8 Exhibition Street
MELBOURNE VIC 3000
Australia
Tel: +61 3 9288 8000
Company Secretary
Mrs Louise Thomson BBus (Dist), FGIA
Group Investor Relations
National Australia Bank Limited
Level 2
2 Carrington Street
SYDNEY NSW 2000
Australia
Email: investorrelations@nab.com.au
Sustainability
National Australia Bank Limited
Level 21
395 Bourke Street
MELBOURNE VIC 3000
Australia
Email: sustainability@nab.com.au
Shareholder Centre website
The Group’s website at nab.com.au/shareholder has a
dedicated separate section where shareholders can gain
access to a wide range of information, including copies of
recent announcements, annual reports as well as extensive
historical information.
Shareholder information line
There is a convenient 24 hours a day, 7 days a week automated
service. To obtain the current balance of your securities and
relevant payment details, telephone 1300 367 647 (Australia) or
+61 3 9415 4299 (outside Australia).
These services are secured to protect your interests. In all
communications with the Share Registry, please ensure you
quote your Securityholder Reference Number (SRN), or in case
of broker sponsored shareholders, your Holder Identification
Number (HIN).
270 National Australia Bank
Glossary
12-month expected credit losses (ECL)
The portion of lifetime expected credit losses
that represent the expected losses arising
from default events that could occur within 12
months of the reporting date.
Basel III
Basel III is a global regulatory framework
designed to increase the resilience of banks
and banking systems and was effective for
ADIs from 1 January 2013.
86 400
86 400 refers to 86 400 Holdings Limited,
86 400 Pty Ltd and 86 400 Technology Pty Ltd,
the entities acquired by the Group in May 2021.
90+ days past due (DPD) and gross impaired
assets to GLAs
Calculated as the sum of ‘90+ DPD assets’ and
‘Gross impaired assets’, divided by gross loans
and acceptances.
90+ DPD assets
90+ DPD assets consist of assets that are
contractually 90 days or more past due, but
not impaired.
AA1000 Stakeholder Engagement Standard
The standard is designed to enable
organisations to respond to stakeholders in a
comprehensive and balanced way. These are
based on the principles Inclusivity, Materiality,
Responsiveness, and Impact.
AASB
Australian Accounting Standards Board.
Accountable Person
An accountable person for the purposes of
the Banking Act 1959 (Cth).
Additional Tier 1 (AT1) capital
AT1 capital comprises high quality
components of capital that satisfy the criteria
for inclusion as Additional Tier 1 capital
as defined in APS 111 Capital Adequacy:
Measurement of Capital.
ADI
Authorised Deposit-taking Institution.
ADR
American Depositary Receipt.
AGM
Annual General Meeting of National Australia
Bank Limited.
AML
Anti-Money Laundering.
Annual Variable Reward (VR)
An 'at risk' opportunity for individuals
to receive an annual performance-based
reward. The actual VR that an individual will
receive in any particular year will reflect both
business and individual performance.
APRA
Australian Prudential Regulation Authority.
APS
Prudential Standards issued by APRA
applicable to ADIs.
ASIC
Australian Securities and
Investments Commission.
ASX
Australian Securities Exchange Limited (or the
market operated by it).
AUSTRAC
Australian Transaction Reports and
Analysis Centre.
Available stable funding (ASF)
The portion of an ADI's capital and liabilities
expected to be reliably provided over a one-
year time horizon.
Average equity (adjusted)
Average equity adjusted to exclude
non-controlling interests and other
equity instruments.
Average interest earning assets
The average balance of assets held by
the Group over the period that generate
interest income.
Bank levy
A levy imposed under the Major Bank Levy Act
2017 (Cth) on ADIs with total liabilities of more
than $100 billion.
BBSW
Bank Bill Swap Rate.
BEAR
Banking Executive Accountability Regime.
BEAR Accountable Person
For the purposes of BEAR, NAB has registered
certain individuals (the directors, Group
Executives, Executive Internal Audit and
Executive Group Money Laundering Reporting
Officer) as ‘Accountable Persons’ with APRA.
BNZ
Bank of New Zealand, a subsidiary of National
Australia Bank Group.
BNZ Life
BNZ Life was the Group's New Zealand life
insurance business operating as BNZ Life.
The sale of BNZ Life to New Zealand life
insurance provider Partners Life completed on
30 September 2022.
Business lending
Lending to non-retail customers including
overdrafts, asset and lease financing, term
lending, bill acceptances, foreign currency
loans, international and trade finance,
securitisation and specialised finance.
Carbon neutral in operations
Refers to the process the Group follows
to first avoid and reduce greenhouse gas
emissions associated with NAB's operational
Scope 1, 2 and 3 emissions (excluding
financed emissions) and then to retire carbon
offsets for residual emissions. NAB's Australian
operations are certified carbon neutral under
the Climate Active Standard for Organisations.
BNZ and JBWere NZ are Toitū net carbonzero
organisation certified.
Cash earnings
Cash earnings is a non-IFRS key performance
measure used by the Group and the
investment community. Cash earnings is
defined as net profit attributable to owners
of the Company from continuing operations
adjusted for non-cash items, including items
such as hedging and fair value volatility, the
amortisation of acquired intangible assets
and gains or losses on certain other items
associated with acquisitions, disposals and
business closures.
Cash net interest income (Cash NII)
Cash NII is derived from statutory net interest
income, including management adjustments
for fair value hedge ineffectiveness and
a reclassification of income from the NAB
Wealth Business that management considers
better reflected in net interest income for
their purposes. In these financial statements,
there is no material difference between Cash
NII and statutory net interest income.
Cash return on equity (cash ROE)
Cash earnings after tax expressed as a
percentage of average equity (adjusted).
CGU
Cash-generating unit.
Citi consumer business
Citi consumer business refers to Citigroup's
Australian consumer business, acquired by
the Group in June 2022.
Citigroup
Citigroup Pty Limited and Citigroup Overseas
Investment Corporation.
Committed Liquidity Facility (CLF)
A facility provided by the RBA to certain ADIs
to assist them in meeting the Basel III liquidity
requirements. The CLF was reduced to zero on
1 January 2023.
Common Equity Tier 1 (CET1) capital
CET1 capital ranks behind the claims of
depositors and other creditors in the event
of winding-up of the issuer, absorbs losses
as and when they occur, has full flexibility of
dividend payments and has no maturity date.
CET1 capital consists of the sum of paid-up
ordinary share capital, retained profits plus
certain other items as defined in APS 111
Capital Adequacy: Measurement of Capital.
Common Equity Tier 1 capital ratio
CET1 capital divided by risk-weighted assets.
Company
National Australia Bank Limited (NAB) ABN 12
004 044 937.
Compensation Scheme of Last Resort (CSLR)
The CSLR is a scheme designed to make
payments on a last-resort basis to eligible
consumers where determinations by the
Australian Financial Complaints Authority
(AFCA) for compensation remain unpaid, as
approved by the Australian Parliament in
June 2023.
Continuing operations
Continuing operations are the components
of the Group which are not
discontinued operations.
Core assets
Represents gross loans and advances
including acceptances, financial assets at
fair value, and other debt instruments at
amortised cost.
Cost to income ratio (CTI)
Represents operating expenses as a
percentage of operating revenue.
CO2-e (carbon dioxide equivalent)
The common unit of measure for the
expression of Greenhouse Gas (GHG)
emissions. Each unit of GHG has a different
global warming potential. Therefore, all
greenhouse gases are converted back
to tonnes (tCO2-e) of carbon dioxide
equivalent to enable consistent comparison
and measurement.
CQiB
Career Qualified in Banking program.
CTF
Counter-Terrorism Financing.
Customer deposits
The sum of interest bearing, non-interest
bearing and term deposits (including retail
and corporate deposits).
Customer Funding Index (CFI)
Customer deposits (excluding certain short
dated institutional deposits used to fund liquid
assets) divided by core assets.
D-SIB
Domestic Systemically Important Banks.
Default
Default occurs when a loan obligation is
contractually 90 days or more past due, or
when it is considered unlikely that the credit
obligation to the Group will be paid in full
without remedial action, such as realisation
of security.
Default but not impaired assets
Calculated as the sum of '90+ DPD assets' and
'Default <90DPD but not impaired assets'.
Dilutive potential ordinary share
A financial instrument or other contract that
may entitle its holder to ordinary shares and
which would have the effect of decreasing
earnings per share. For the Group in the
September 2023 full year, these include
convertible notes and notes issued under
employee incentive schemes.
Discontinued operations
Discontinued operations are a component
of the Group that either has been disposed
of, or is classified as held for sale, and
represents a separate major line of business
or geographical area of operations, which is
part of a single coordinated plan for disposal.
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Forward looking adjustment (FLA)
Forward looking adjustments reflect part
of the provision for credit impairment
derived from reasonable and supportable
forecasts of potential future conditions
(forward looking information) that are not
otherwise captured within the underlying
credit provision or the economic adjustments.
They incorporate more targeted sector-
specific forward looking information.
Full-time equivalent employees (FTEs)
Includes all full-time, part-time, temporary,
fixed term and casual employee equivalents,
as well as agency temporary employees and
external contractors either self-employed
or employed by a third party agency. Note:
this excludes consultants, IT professional
services, outsourced service providers and
non-executive directors.
Greenhouse gas (GHG) emissions
Gaseous pollutants released into the
atmosphere that amplify the greenhouse
effect. Gases responsible include
carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons and
sulphur hexafluoride.
Gross Domestic Product (GDP)
GDP is the market value of finished goods and
services produced within a country in a given
period of time.
Gross impaired assets
Calculated as the sum of ‘Impaired assets’ and
‘Restructured loans’.
Gross loans and acceptances (GLAs)
Total loans, advances and acceptances,
including unearned and deferred fee income,
excluding associated provisions for expected
credit losses. Calculated as the sum of
'Acceptances', 'Loans and advances at
fair value’ and ‘Loans and advances at
amortised cost’.
Group
NAB and its controlled entities.
Group Executives
The ELT, excluding the Group CEO.
Group Performance Indicators (GPI)
A scorecard of financial and non-financial
performance measures linked to the Group’s
key strategic priorities, overlaid by a
qualitative assessment. The GPI is used to
assess the Group’s performance for the
purpose of the Annual VR Plan.
Hedging and fair value volatility
This volatility represents timing differences
between the unrealised gains or losses
recognised over the term of the transactions
and the ultimate economic outcome which
will only be realised in future. This volatility
arises primarily from fair value movements
relating to trading derivatives held for risk
management purposes; fair value movements
relating to assets, liabilities and derivatives
designated in hedge relationships; and fair
value movements relating to assets and
liabilities designated at fair value.
High-quality liquid assets (HQLA)
Consists primarily of cash, deposits with
central banks, Australian government and
semi-government securities and securities
issued by foreign sovereigns as defined in APS
210 Liquidity.
Housing lending
Mortgages secured by residential properties
as collateral.
IBOR
Interbank Offered Rates.
IFRS
International Financial Reporting Standards
as issued by the International Accounting
Standards Board (IASB).
Impaired assets
Consists of: Retail loans (excluding unsecured
portfolio managed facilities) which are
contractually 90 days or more past due with
security insufficient to cover principal and
interest or where sufficient doubt exists
about the ability to collect principal and
interest in a timely manner. Non-retail loans
which are contractually past due and / or
where there is sufficient doubt the ability
to collect principal and interest. Off-balance
sheet credit exposures where current
circumstances indicate that losses may
be incurred. Unsecured portfolio managed
facilities that are 180 days or more past due
(if not written off).
Imputation credit
Tax credit passed on to shareholders
who receive partially or fully franked
dividend / distribution.
Interim 2030 sector-specific
decarbonisation targets (sector
decarbonisation targets)
Refers to targets set at intervals towards
over-arching net zero by 2050 targets. NAB's
first wave of interim targets are set for 2030.
Also referred to as 'sector targets'.
Internal ratings-based (IRB)
An approach to calculate capital
requirements for credit risk exposures, which
utilises the outputs of internally developed
credit risk measurement models.
Just transition
Global effort to transition to a low carbon
economy in a way that is as fair and inclusive
as possible to all people, creating decent
work opportunities and leaving no one behind.
Key Management Personnel (KMP)
NAB's Key Management Personnel (KMP) is
assessed each year and comprises the non-
executive directors of NAB, the Group CEO
(an executive director of NAB) and those
employees of the Group who have authority
and responsibility for planning, directing and
controlling the activities of both NAB and
the Group.
Leverage ratio
Tier 1 capital divided by exposures as
defined by APS 110 Capital Adequacy. It
is a simple, non-risk based measure to
supplement the risk-weighted assets based
capital requirements. Exposures include
on-balance sheet exposures, derivative
exposures, securities financing transaction
exposures and non-market related off-
balance sheet exposures.
Lifetime expected credit losses (ECL)
The ECL that result from all possible
default events over the expected life of a
financial instrument.
Liquidity Coverage Ratio (LCR)
A metric that measures the adequacy of
HQLA available to meet net cash outflows
over a 30-day period during a severe liquidity
stress scenario.
Location-based accounting
An emissions accounting approach that
calculates electricity emissions based on
the average emissions intensity of the
electricity grid in the location (state) in
which the electricity consumption occurs.
Location-based accounting therefore does
not recognise the surrender of LGCs as
evidence of renewable electricity use.
Long Term Variable Reward (LTVR)
An 'at risk' opportunity for the ELT to receive
a long-term performance-based reward,
vesting after a four-year performance period
subject to the applicable performance hurdle.
The actual LTVR that an individual will receive
on vesting will reflect achievement of the
performance hurdle.
Distributions
Payments to holders of equity instruments
other than ordinary shares, including National
Income Securities.
Dividend payout ratio
Dividends paid on ordinary shares divided by
cash earnings per share.
DLP
Distinctive Leadership program.
EaR
Earnings at risk.
Earnings per share - basic
Calculated as net profit attributable to
ordinary equity holders of the parent
(statutory basis) or cash earnings (cash
earnings basis), divided by the weighted
average number of ordinary shares.
Earnings per share - diluted
Calculated as net profit attributable to
ordinary equity holders of the parent
(statutory basis) or cash earnings (cash
earnings basis), divided by the weighted
average number of ordinary shares, after
adjusting both earnings and the weighted
average number of ordinary shares for the
impact of dilutive potential ordinary shares.
Economic adjustments
The economic adjustment forms part of the
provision for credit impairment derived from
reasonable and supportable forecasts of
potential future conditions (forward looking
information) that is not captured within the
underlying credit provision. It incorporates
general macro-economic forward looking
information (for example, GDP, unemployment
and interest rates).
Enforceable Undertaking (EU)
An enforceable undertaking under subsection
197(1) of the Anti-Money Laundering and
Counter-Terrorism Financing Act 2006 (Cth)
entered into between NAB and the CEO of
AUSTRAC on 29 April 2022, in relation to
concerns identified by AUSTRAC with the
Group’s compliance with certain AML and CTF
requirements which were the subject of a
formal investigation by AUSTRAC.
Environmental reporting year
Environmental reporting period from 1 July to
30 June. Aligned with the National Greenhouse
and Energy Reporting Act 2007 (Cth).
Executive Leadership Team (ELT)
Executive Leadership Team means the Group
CEO and the Group Executives.
Fair value
The price that would be received to sell an
asset or paid to transfer a liability in an orderly
transaction between market participants at
measurement date.
Fair value (for the purposes of equity
awards set out in the Remuneration Report)
The value of the awards provided are
measured by reference to the grant date fair
value of the shares and performance rights
provided to employees. The grant date fair
value of each share is determined by the
market value of NAB shares, and is generally
a five-day weighted average share price. The
fair value of the shares and performance
rights with market performance hurdles is
determined using a simulated version of the
Black-Scholes model.
FINSIA
Financial Services Institute of Australasia.
Fixed Remuneration (FR)
Base salary and superannuation paid regularly
during the year.
272 National Australia Bank
Market-based accounting
An emissions accounting approach that
allows total electricity consumption to
be reduced by the megawatt hours of
renewable electricity consumed by the
company before applying an emissions
factor to grid-imported electricity. Market-
based accounting therefore recognises the
surrender of LGCs as evidence of renewable
electricity use.
MLC Life
MLC Limited.
MLC Wealth
MLC Wealth was the Group’s Wealth division
which provided superannuation, investments,
asset management and financial advice to
retail, corporate and institutional customers,
supported by several brands including MLC,
Plum and investment brands under MLC
Asset Management. The sale of MLC Wealth
to Insignia Financial Ltd completed on
31 May 2021.
NAB
'NAB' or the 'Company' means National Australia
Bank Limited ABN 12 004 044 937.
NAB Foundation
A registered charity which does not form part
of the Group.
NAB risk management
Management of interest rate risk in the
banking book, wholesale funding and liquidity
requirements and trading market risk to
support the Group’s franchises.
Net interest margin (NIM)
Net interest income derived on a cash
earnings basis expressed as a percentage of
average interest earning assets.
Net Promoter Score (NPS)
Net Promoter® and NPS® are registered
trademarks, and Net Promoter Score and
Net Promoter System are trademarks of Bain
& Company, Satmetrix Systems and Fred
Reichheld. Net Promoter Score measures the
likelihood of a customer's recommendation
to others.
Net Stable Funding Ratio (NSFR)
A ratio of the amount of available stable
funding (ASF) to the amount of required stable
funding (RSF).
Non-performing exposures
Exposures which are in default aligned to the
definition in APS 220 Credit Risk Management.
NZBA
Net Zero Banking Alliance.
Official Cash Rate
Official Cash Rate is an interest rate set by the
Reserve Bank of New Zealand.
PPS
Perpetual preference shares.
PRB
Principles for Responsible Banking
RBA
Reserve Bank of Australia.
RBNZ
Reserve Bank of New Zealand.
Required stable funding (RSF)
The amount of stable funding an ADI is
required to hold measured as a function
of the liquidity characteristics and residual
maturities of the various assets held by an ADI,
including off-balance sheet exposures.
Risk-weighted assets (RWA)
A quantitative measure of risk required by the
APRA risk-based capital adequacy framework,
covering credit risk for on and off-balance
sheet exposures, market risk, operational risk
and interest rate risk in the banking book.
RMBS
Residential Mortgage Backed Securities.
Royal Commission
The Royal Commission into Misconduct
in the Banking, Superannuation and
Financial Services Industry established on
14 December 2017 by the Governor-General
of the Commonwealth of Australia to
conduct a formal public inquiry into Australian
financial institutions.
Scope 1
This includes direct emissions from within an
organisation’s boundary. These emissions are
from sources that the organisation owns or
controls such as:
• Combustion of fuel in boilers, furnace or
generators that are owned or controlled
by the reporting company.
•
• Generation of electricity, steam or heat in
equipment that is owned or controlled by
the reporting company.
Business travel in vehicles such as
company cars or corporate jets that
are owned or controlled by the
reporting company, colleague commuting
in company-owned or controlled vehicles,
such as company cars.
Hydrofluorocarbon emissions
from company-owned or
controlled refrigeration or air-
conditioning equipment.
•
Scope 2
Indirect emissions from electricity that is used
by the organisation but is generated outside
the organisation’s boundary by another
company, such as an electricity provider.
This is called ‘purchased electricity’. This
includes indirect emissions from purchased or
acquired electricity, steam, heat or cooling.
Scope 3
All other indirect emissions that occur outside
the boundary of the organisation as a result
of the activities of the organisation, including
indirect emissions from:
•
Business travel in non-company owned
or controlled vehicles, such as
rental cars, colleague cars, rail and
commercial planes.
• Combustion of fuel in boilers or
•
•
•
•
furnaces not owned or controlled by the
reporting company.
Energy used by colleagues working
from home.
Third-party production or manufacture
of materials and resources used by the
reporting company, such as furniture,
paper and equipment.
Indirect losses resulting from the
transmission of electricity and other fuels.
Emissions generated through the
investments a company makes, see
definition for 'Financed emissions'.
Securitisation
Structured finance technique which involves
pooling, packaging cash flows and converting
financial assets into securities that can be
sold to investors.
SME
Small and medium-sized enterprises.
Stable Funding Index (SFI)
Term Funding Index (TFI) plus Customer
Funding Index (CFI).
Standardised approach
An alternative approach used to calculate
the capital requirement for credit risk, which
utilises regulatory prescribed risk-weights
based on external ratings and / or the
application of specific regulator defined
metrics to determine risk-weighted assets.
Standardised Measurement Approach (SMA)
An approach used to calculate the capital
requirement for operational risk based on
a business indicator, a financial statement
proxy of operational risk exposure. This
approach was applied by the Group from
1 January 2022.
Statutory net profit
Net profit attributable to owners of
the Company.
Statutory return on equity
Statutory earnings after tax expressed as
a percentage of average equity (adjusted),
calculated on a statutory basis.
Structured entity
An entity created to accomplish a narrow
well-defined objective (e.g. securitisation of
financial assets). A structured entity may take
the form of a corporation, trust, partnership
or unincorporated entity. Structured entities
are often created with legal arrangements
that impose strict limits on the activities of
the structured entity.
TCFD
The Financial Stability Board Task Force on
Climate-related Financial Disclosures.
Term Funding Index (TFI)
Term wholesale funding with remaining
maturity to first call date greater than 12
months, including Term Funding Facility (TFF)
drawdowns divided by core assets.
Tier 1 capital
Tier 1 capital comprises CET1 capital and
instruments that meet the criteria for
inclusion as Additional Tier 1 capital set out
in APS 111 Capital Adequacy: Measurement
of Capital.
Tier 1 capital ratio
Tier 1 capital divided by risk-weighted assets.
Tier 2 capital
Tier 2 capital comprises other components
of capital that, to varying degrees, do not
meet the requirements as Tier 1 capital
but nonetheless contribute to the overall
strength of an ADI and its capacity to
absorb losses.
Top quartile
Top quartile comparison is based upon Glint’s
client group (domestic and global, from
all industries).
Total average assets
The average balance of assets held by
the Group over the period, adjusted for
discontinued operations.
Total capital
Tier 1 capital plus Tier 2 capital.
Total capital ratio
Total capital divided by risk-weighted assets.
Total Shareholder Return (TSR)
The return that a shareholder receives
through dividends (and any other
distributions) together with capital gains over
a specific period.
Treasury shares
Shares issued to meet the requirements of
employee incentive schemes which have not
yet been distributed.
UN PRB
United Nations Principles for
Responsible Banking.
Underlying profit / loss
Underlying profit / loss is a non-IFRS
performance measure used by the Group.
It represents cash earnings before credit
impairment charges and income tax expense.
UNEP FI Guidelines
United Nations Environment Programme
Finance Initiative Guidelines for Climate Target
Setting for Banks.
Value at Risk (VaR)
A mathematical technique that uses
statistical analysis of historical data to
estimate the likelihood that a given portfolio’s
losses will exceed a certain amount.
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Weighted average number of
ordinary shares
The number of ordinary shares outstanding
at the beginning of the period, adjusted by
the number of ordinary shares bought back
or issued during the period multiplied by
a time-weighting factor. The time-weighting
factor is the number of days that the shares
are outstanding as a proportion of the total
number of days in the period.
274 National Australia Bank
This page has been intentionally left blank. www.nab.com.au/shareholderThe cover of this publication is printed on Revive Laser paper stock. Revive Laser is 100% Recycled, manufactured from Forest Stewardship Council® (FSC®) Recycled certified fibre and manufactured carbon neutral. It is produced by an ISO14001 (environmental management system) certified mill. No chlorine bleaching occurs in the recycling process. The text of this publication is printed on Sumo Laser paper stock. Sumo Laser is an environmentally responsible paper manufactured under the ISO14001 Environmental Management System, using elemental chlorine free pulp. Sumo Laser is FSC® Certified Mix pulp. The printer’s operation is accredited to ISO 14001 and ISO 9001 (quality management system) standards and holds FSC® (chain of Custody) certification.This publication is fully recyclable, please dispose of wisely. Emissions generated from the production of this Annual Report have been offset. Offsets corresponding to 8,171 kg of CO2-e have been retired. © 2022 National Australia Bank Limited ABN 12 004 044 937 AFSL and Australian Credit Licence 230686 A170520-1022