NAB earnings take $1.1 billion hit

NAB earnings take $1.1 billion hit

First half earnings at National Australia Bank (ASX: NAB) will take a $1.1 million negative impact after tax due to factors including customer remediation a drop in value for its investment in MLC Life.

The lion's share of the impact comes from applying software capitalisation policy that lifts the minimum threshold at which software is to be capitalised from $2 million to $5 million.

Across the business, this change aimed at raising business accountability for projects will translate to more than $1 billion in NAB's capitalised software balance, hitting earnings by $742 million after tax.

The remainder of the earnings hit comes from $268 million in customer remediation ($188 million after tax) and a $214 million impairment to NAB's 20 per cent investment in insurance company MLC Life.

Approximately 69 per cent of the 1H20 cash earnings charges are for wealth-related matters, 23 per cent for banking-related matters, and 8 per cent for Bank of New Zealand.

NAB Financial Planning higher assumed refund rate of 40 per cent - or 56 per cent including interest costs - compared to 28 per cent at 30 September 2019.

"Until all customer payments have been completed, the final cost of customer-related remediation matters remains uncertain," the bank added.

The announcement comes shortly after Westpac announced $1.4 billion in earnings impacts for the half, although most of that came as a result of the AUSTRAC investigation into alleged non-compliance money laundering regulation.

Westpac's additional provisions for customer refunds and payments in that announcement were much higher than NAB's at $260 million after tax.

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