With millionth new customer, NAB ‘break-up’ campaign causes red star to shine

NAB’s red star appears to be on the rise, with its customer satisfaction rating continuing to increase.

It is also preparing to sign up its one millionth customer 18 months after launching its "break-up" campaign urging customers of the other big four banks to switch over.

In addition, banking analysts at Nomura are encouraging their clients to increase their holdings in NAB (alongside Westpac), rating the bank as a buy. The agency rates ANZ as neutral and are urges clients to reduce their Commonwealth Bank (CBA) stock holding.

Nomura banking analyst Victor German says NAB and Westpac are "best placed to deliver better margin performance over the medium term".

Nomura analysis shows NAB has the fastest growing home loan book (9.1%) over past 12 months, almost matched by ANZ (9%), with CBA (4.5%) and Westpac (4.4%) lagging.

The rebirth of the NAB brand comes as former CBA chief David Murray backs a review of the banking system.

Murray said a review should look at ways to improve the ownership structure of banks, adding that the issue of “too big to fail” would remain “very front of mind of all the regulators”.

The NAB break-up campaign kicked off on Valentine’s Day 2011, when NAB said it would pay the $700 early mortgage exit fee for CBA and Westpac customers switching to NAB as part of a campaign of eliminating mortgage and credit card fees.

NAB was the first major bank to abolish home loan early exit fees in December 2010 – ahead of the government ban from July 1 last year.

Bank customer satisfaction ratings compiled by Roy Morgan show that NAB’s satisfaction rating has been rising since the end of 2009, when the bank first began abolishing its over limit fee on credit cards and reduced credit card late payment fee from $30 down to $5.

Between 2008 and mid-2010 NAB’s satisfaction rating was the lowest of the big four banks at a time when its share price lagged the banking index. This culminated in an internal revamp of the bank, led by chief executive Cameron Clyne, who replaced John Stewart as NAB boss in January 2009.

The bank currently has the highest satisfaction rating of the major banks at 78.2% as measured by Roy Morgan, with ANZ the lowest ranked (and on a steep downward trajectory coinciding with apparent customer distaste for its independent interest rate decisions).

NAB became the top-ranked big four bank at the start of 2012 – and while it did dip in the first few months of the year, it has maintained its leads over the other banks.

Over the past 12 months to June, NAB’s customer satisfaction rating has improved by 3.6 percentage points.

Clyne told the Australian Financial Review the expectation of signing up its one millionth new customer this week was a significant milestone and well ahead of its target.

However, Paul Dowling from banking analysts East & Partners has warned that the key for the bank will be growing the amount of business they get from their new customers.

“The real test is the next 18 months, two years, to see what NAB can do with these customers. This is great, they’ve got to first base, 1 million new customers, but it’s what comes next.”

NAB’s group executive of personal banking Lisa Gray says the bank must now focus on retaining the new customers and cross-selling them other products.

For more, view our free webinar Refinancing and the Interest Rates Riddle.