Powered by MOMENTUM MEDIA
subscribe to our newsletter

NAB’s $2bn capital injection ‘another positive’

Morningstar has applauded the major bank’s earlier-than-expected announcement that the sale of 80 per cent of its life insurance business has been completed.

In a research note this week, Morningstar analyst David Ellis said the $2.4 billion sale to Japan’s Nippon Life Insurance Company on 3 October “is another positive for the bank” following the successful Clydesdale demerger in February this year.

“The bank had previously advised completion [of the Nippon deal] was on track for before the end of calendar 2016. NAB also announced a 20-year distribution agreement with Nippon Life to provide insurance products through the bank’s own and aligned distribution networks,” Mr Ellis said.

He noted that NAB will retain 20 per cent of the business and, importantly, retain full ownership of the rest of the wealth division, including superannuation, platforms, advice and asset management.

NAB will retain the MLC brand and will be licensed for use by MLC Life Insurance for 10 years and will continue to be used in the bank’s superannuation, investments and advice business, Mr Ellis said.

Advertisement
Advertisement

“While the sale only marginally boosts ROE, it significantly improves capital levels,” he said. “Net capital of approximately $2.2 billion from the sale of the life business was received on 3 October and will be retained within the group.”

Mr Ellis said the sale is expected to boost NAB’s Tier 1 capital ratio by 50 basis points. The major lender’s common equity Tier 1 ratio was 9.5 per cent at 30 June this year with a target ratio of 8.75 per cent to 9.25 per cent based on current regulatory requirements.

“We expect the common equity Tier 1 ratio will be approximately 9.4 per cent at 30 September 2016 when adjusted for the sale of 80 per cent of the life business (positive 50 basis points), the impact of the 1 July 2016 mortgage risk weight changes (negative 80 basis points) and wealth subsidiary debt maturity (negative eight basis points).”

[Related: NAB annnounces business restructure]

NAB’s $2bn capital injection ‘another positive’

PROMOTED CONTENT


>In a research note this week, Morningstar analyst David Ellis said the $2.4 billion sale to Japan’s Nippon Life Insurance Company on 3 October “is another positive for the bank” following the successful Clydesdale demerger in February this year.

“The bank had previously advised completion [of the Nippon deal] was on track for before the end of calendar 2016. NAB also announced a 20-year distribution agreement with Nippon Life to provide insurance products through the bank’s own and aligned distribution networks,” Mr Ellis said.

He noted that NAB will retain 20 per cent of the business and, importantly, retain full ownership of the rest of the wealth division, including superannuation, platforms, advice and asset management.

NAB will retain the MLC brand and will be licensed for use by MLC Life Insurance for 10 years and will continue to be used in the bank’s superannuation, investments and advice business, Mr Ellis said.

“While the sale only marginally boosts ROE, it significantly improves capital levels,” he said. “Net capital of approximately $2.2 billion from the sale of the life business was received on 3 October and will be retained within the group.”

Mr Ellis said the sale is expected to boost NAB’s Tier 1 capital ratio by 50 basis points. The major lender’s common equity Tier 1 ratio was 9.5 per cent at 30 June this year with a target ratio of 8.75 per cent to 9.25 per cent based on current regulatory requirements.

“We expect the common equity Tier 1 ratio will be approximately 9.4 per cent at 30 September 2016 when adjusted for the sale of 80 per cent of the life business (positive 50 basis points), the impact of the 1 July 2016 mortgage risk weight changes (negative 80 basis points) and wealth subsidiary debt maturity (negative eight basis points).”

[Related: NAB annnounces business restructure]

NAB’s $2bn capital injection ‘another positive’
mortgagebusiness

Latest News

Several lenders, including the major banks, have announced relief measures for Victorian borrowers impacted by the floods. ...

The major bank has forecast an RBA tightening in two steps in H2 2023 to take the official cash rate to 0.5 per cent by the end of 2023. ...

Housing-related consumer sentiment has plummeted by 27 per cent since November 2020, and is in pessimistic territory for the first time sinc...

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.