NAB drops most monthly account fees

Jason Bryce
National Australia Bank's Personal Banking Group Executive, Lisa Gray, announced the end of monthly service fees on everyday personal transaction accounts yesterday.

The current $4 and $5 monthly account service fees on NAB's Classic and e-Banking personal transaction accounts will not be charged after Friday, 22 January 2010.

The other big banks have their monthly account service fees, on their chief account options, currently set between $3 and $6 for everyday accounts.

Monthly account service fees will also disappear from passbook accounts, the Clear Banking account and seven other NAB transaction accounts. Branch withdrawal fees will also be cut from cheques and e-Banking accounts.

The $10 monthly fee on NAB's premium personal account will remain in place, matching Westpac and ANZ who also charge $10 per month for a premium personal account.

This round of cuts will cost NAB $110 million, on top of the $100 million from the abolition of penalty fees, announced several months ago, said Gray.

"We have no intention of trying to recoup this in other areas, we have no hidden agenda, there is no asterisk on this, no disclaimer."

Quick estimates by several sell-side analysts yesterday suggested the NAB estimate of the cost to its bottom line were overstated, taking into account customer growth and the increased margin the bank must be planning to earn in order to compensate for this shift in pricing tactics.

Goldman Sachs JBWere estimated the cost could be as low as $50 million, because of the offset from better margins and volumes as well as lower costs including savings related to fewer customer complaints.

Gray said yesterday's move was a result of extensive customer research.

"Customers tell us they think these fees are unfair. These are the most complained-about fees we have and this will certainly help us improve our relationship with customers."

A couple of other banks have made account pricing decisions on the basis of corresponding feedback from customer research this year.

One is Westpac, which, through its St George brand, has for some months been promoting an account option without monthly fees. A second is ING which not only charges no fees on its new, mass-marketed transaction account, but also pays no interest.

Overall, Gray says, NAB's retail project is about "improving our customer relations and providing more tools for customers to make their banking experience easier and more enjoyable.

"We are delighted to continue to lead on cutting fees," said Gray, who made it clear this was about winning customers from other banks.

NAB said it has 860,000 everyday transaction account customers, much fewer than the other majors.

NAB's household deposit growth has been negligible in 2009, after some growth late last year when the flight to the big four was in full swing. NAB's household deposit total has been stuck at around $55 billion for almost six months, according to APRA data.

ANZ has overtaken NAB in household deposit dollars with $60.1 billion after growth of 25.1 per cent in the 12 months to August.

Westpac and St George grew household deposits by 15.6 per cent to $101.7 billion, while CBA and Bankwest were up 10.0 per cent to $138 billion.

NAB will be making more fee-cutting announcements "sooner rather than later" said Gray, who is now focused on cutting fees on business banking accounts.