Selling 80 per cent of its life insurance business to Nippon Life will bring in $2.4 billion for NAB, but the bank expects the deal to incur significant separation costs, including the cost of building a new technology platform for the spin-off.
Announcing its full year results today, NAB revealed that it would remove its superannuation and investments businesses from MLC Limited before selling 80 per cent of it to Nippon Life.
"In addition to regulatory approval required to complete the deal, between now and completion we've also got a fair bit of work to do to create the entity that we're selling 80 per cent of to Nippon Life," NAB CFO Craig Drummond said
The bank would retain the remaining 20 per cent.
"We need to extract the superannuation fund business, which NAB will then retain, and it is a reasonably complex exercise given that we currently have eight super funds and three administrators," the CFO said.
"Unquestionably, we will create considerable efficiencies from having a more simplified superannuation business going forward," Drummond said.
"And of course, we need to establish the life insurance business as a standalone entity, including [developing] a new technology platform."
The "significant" separation costs are set to weigh in at $440 million after tax, the CFO revealed.
Digital investment
NAB reported a full year profit of $6.34 billion, up 19.7 per cent. Cash earnings were $5.84 billion, up 15.5 per cent.Group CEO Andrew Thorburn said that NAB has had a focus on driving customer advocacy, which would drive better outcomes for the bank's shareholders.
The bank has taken steps to embed the Net Promotor Score into its "operating rhythm," he said.
"Improving our processes and investing in digital capability will improve our customer experience," the CEO said.
"We have addressed a number of customer pain points this last year; we will double the number we fix in 2016," Thorburn said.
Digital investments over the last year included the launch of NAB Prosper — a digital advice platform for NAB customers — and a partnership with Xero, under which the bank opened its core API to Xero's SME-focussed software-as-a-service accounting package.
NAB Labs, which was established during the year, will help create a "culture of innovation" within the bank, Thorburn said.
"Labs is about establishing an innovation system, which will deliver a consistent stream of new ideas that can be rapidly commercialised," he said
The bank during the year also , a $50 million equity fund that will invest in new and emerging technology and payments companies.
Data centre migration
The bank achieved two major technology milestones during the last half of the year, Thorburn said: The pilot of NAB's Personal Banking Origination Platform (PBOP) and the completion of the migration to NAB's Deer Park data centre, which originally opened in 2013.
The bank is set to roll out the PBOP across its network in 2016, the CEO said.
"This is a complex and critical roll out and we will do it properly so that our staff and customer experience is positive," Thorburn said.
The data centre program has been a "massive undertaking" involving the migration of thousands of applications and servers, the CEO said.
"We now have a more modern and stable platform," he said.
"Technology will remain a key focus and investment for us," the CEO said.
"We will need to implement many regulatory changes and customer enhancements, as well as ensure our systems are both stable and flexible. We will do this in a planned way based on do-ability, affordability, and the demands of the external environment."