Analysis: Breaking down 'break up'
There is not much of a scorecard in the 2011 profit pack for National Australia Bank that would allow readers to evaluate the success, or otherwise, of the now fading "break up" campaign introduced by the bank in February to reposition the marketing of its retail banking business in Australia.There's also no detail on some key operational highlights relating to third-party lending, either through Advantedge or through non-NAB deposit-gathering via UBank. This makes comparisons with other disclosures during 2011 difficult.A couple of crumbs made the full-year financials. NAB said there was net growth in transaction accounts of 295,000 over the year, up 46 per cent on net growth in this product line from 2010.NAB also asserted that it recorded growth in home lending of 3.3 times system growth in 2011, or growth in balances of 22 per cent in a year in which housing credit overall advanced by just 6.8 per cent.This number is itself dubious, since APRA data puts NAB's 12-month growth at 15.1 per cent, or 2.2 times system growth. The difference is NAB's insistence on counting one third of its business loans in Australia as home loans, a portfolio worth $59 billion.It's also worth noting that growth in residentially secured business loans increased only seven per cent over the year, so the business bank may not be the beneficiary of a warmer attitude among prospective customers towards NAB's retail network.The only other metric mentioned by NAB is the customer satisfaction scores produced by Roy Morgan Research, which is hardly internal information, however favourable. On this measure, NAB is more or less tied with ANZ for first place among the major banks, with 78 per cent of its customers content.And that, a little surprisingly, is it. The other achievements, if any, of "break up" over the last eight months do not warrant a mention.Instead, there are a few references to the bank's "fair value" approach, a cornerstone of both product pricing and the management of the bank's reputation over the last two years.As pointed out a number of times in this newsletter over the year, the primary driver of above-average growth in home lending for NAB is the work of third-party funding through Advantedge, and the house-brand home loans provided through the three home loan "aggregation" platforms of Choice, Fast and Plan.It is through Advantedge, in fact, that NAB steers home-loan funding to its UBank brand.UBank, moreover, was clearly the primary driver of net growth in deposits at NAB six months ago.The data is lacking on this occasion to be definite, but this in itself is a fact that can be put to use.If "break up" was going great guns NAB would say so. They aren't, so it isn't.