Eric Johnston Sydney Morning Herald 14 December 2012
INVESTORS have issued National Australia Bank a stinging rebuke, rounding out a tough year for the lender, marked by falling earnings, a sluggish share price and hundreds of millions in losses on its under-pressure UK business.
After years of underperformance by the bank, some 21 per cent of shareholders voted against NAB's remuneration report at its annual meeting on Thursday. This marked one of the biggest protest votes issued to a major bank since the introduction of the non-binding vote seven years ago.
The poll fell just short of the 25 per cent ''first strike'' threshold that, if breached, would have put the bank's board a step closer to facing a spill.
Large investors have become increasingly frustrated over the bank's track record of negative surprises, including more than $1 billion in losses on a portfolio of troubled credit instruments since 2008 and this year's UK shock that ultimately cost NAB more than $700 million in restructuring charges and provisions.
NAB chairman Michael Chaney told the meeting in Perth the bank's board felt disappointment over the share price underperformance.
''Let me assure you, the board feels the same disappointment that the shareholders feel in respect of returns,'' Mr Chaney said.
''All I can say is that we are really focused on endeavouring to ensure that our returns are better as we go forward.''
NAB's shares, which closed yesterday at $24.60, have gained 5.3 per cent so far this year. This has underperformed the broader bank index, which is up more than 20 per cent.
While the shareholder vote is traditionally directed at remuneration, the NAB rebuke was widely regarded as a broader protest directed at the bank's board.
''The annual meeting has become a lightning rod for shareholder dissatisfaction for NAB's broader performance,'' said Dean Paatsch, a director for Ownership Matters, a proxy adviser firm.
Even so, Sydney rival Westpac, which also held its annual meeting on Thursday, suffered a mild protest, with a 9 per cent vote against its remuneration report. This came as Westpac chief Gail Kelly emerged as one of the nation's highest-paid bankers with a $9.6 million pay packet.
NAB chief executive Cameron Clyne's pay rose to $8.8 million last financial year with almost $4 million worth of bonuses. Last month NAB posted a 22 per cent drop in full-year net profit to $4.08 billion, with the bank weighed by problems in the UK.
Mr Chaney, who was overwhelmingly re-elected as NAB chairman, has acknowledged the bank's earnings drop this year was ''below budget'' and hurt by the bank's troubled UK business.
Mr Chaney issued a cautious outlook for the banking environment and said it would take another year to finalise the restructuring of the UK business.
Although at the end of the overhaul the business - centred on Clydesdale Bank in Scotland - will emerge as ''largely self-funded and profitable''.
NAB this year sought to limit further shareholder losses in Britain by cutting 1400 jobs, closing dozens of branches and exiting commercial property loans, in response to an economy sinking deeper into recession.
Mr Chaney said the decision mid-last decade to expand into the south of the UK - a move that ultimately triggered this year's shareholder losses - was viewed as the right thing to do at the the time.
Meanwhile, Mr Clyne told the meeting 2013 would be a ''challenge''. Even so, he said NAB has ''good momentum in its core Australian and New Zealand businesses and the right cost disciplines for these more difficult times''.