The National Australia Bank Ltd (ASX: NAB) share price could flop tomorrow after the bank announced that both the NAB CEO and Chairman are leaving.
NAB is one of the four largest financial institutions in Australia in terms of market capitalisation, earnings and customers. However, in 2018, it was Australia’s largest lender to businesses and has operations in wealth management and residential lending.
NAB’s CEO and Chairman are leaving
NAB has announced that both CEO Andrew Thorburn and Chairman Dr Ken Henry advised today they would leave the bank. Mr Thorburn will leave on 28 February 2019. Dr Henry will retire once a new CEO has been appointed.
NAB Director Philip Chronican will be acting CEO until a permanent appointment is made, with NAB sourcing candidates globally and internally. Mr Chronican has “extensive domestic banking experience”, most recently as the executive for Australia and New Zealand Banking Group’s (ASX: ANZ) retail and commercial businesses.
NAB CEO Mr Thorburn said: “It has been an honour to be the CEO of NAB, and to have been part of NAB since 2005.
“I acknowledge that the bank has sustained damage as a result of its past practices and comments in the Royal Commission’s final report about them.”
The comments made about NAB’s leadership by Commissioner Hayne in the Royal Commission clearly didn’t help their cause.
NAB FY19 First Quarter Trading Update
NAB also decided to release its first quarter of FY19 trading update to the market this evening.
NAB reported a statutory net profit of $1.7 billion and cash earnings of $1.65 billion. The cash earnings represented a 3% drop compared to the first quarter of FY18, excluding restructuring costs. On a positive note, NAB’s earnings were 2% higher than the quarterly average of the second half of FY18.
NAB explained that revenue was broadly stable with good volume growth offset by lower margins and lower markets & treasury income.
The net interest margin (NIM) declined primarily due to pressures in housing lending and lower markets & treasury earnings. Expenses decreased by 3% given productivity initiatives, and lower Royal Commission and marketing spending.
Finally, NAB revealed that its CET1 ratio was 10% at the end of December 2018.
NAB CFO Gary Lennon said: “As previously highlighted customer remediation programs and regulatory compliance investigations are continuing in FY19 with potential additional costs, although amounts and timing remain uncertain.
Is the NAB share price a buy for the 8% dividend yield?
I think it’s fair to question how much a change of CEO and Chairman will actually alter things for NAB at this stage considering the bank is probably going through the necessary changes to improve culture, governance and fees.
NAB shares have the highest dividend yield of 8%. So, while it’s not good to lose your two most important leadership positions, it may not actually affect the bottom line of NAB much at all. If the NAB share price drops tomorrow it could be worth considering if you’ve been looking to buy NAB shares for income.
However, I don’t think NAB will generate a lot of capital growth for investors due to the many difficulties still facing the banking sector like falling house prices. That’s why I would rather invest in the proven ASX shares in the free report below that could provide good dividends and capital growth.
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