NAB has wound up a traumatic 12 months in which it lost its chief executive and chairman by announcing a 10.6% drop in full-year profit and cutting its final dividend.

The bank’s full-year results on Thursday also showed that the lender will have to pay $1.1bn back to customers in compensation resulting from a range of mis-selling and misconduct scandals exposed by the banking royal commission.

The acting chief executive, Phil Chronican, who took over when Andrew Thorburn quit in February after heavy criticism from the commission, said the bank had faced a “very challenging” year that had required “significant actions” to deal with past problems and to regain the trust of customers and the public.

Chronican said the bank was two years into a three-year transformation plan aimed at improving service and compliance. But he said the executive management would not receive any short-term bonuses or pay rises.

“While we have made progress, it is not enough to be recognised in executive short-term variable reward in 2019,” Chronican said.

Shares in NAB lifted 2.6% to $27.80 on Thursday as investors hoped the bank could now draw a line under the fallout from the royal commission.

Analysts at UBS warned that it was still a “soft result” for the bank and said it faced worsening conditions and falling asset quality as mortgage arrears rose in every state.

The lender will pay a fully franked final dividend of 83c – down from 99c a year ago – mirroring the cut to its interim payout in May.

Stripping out the cost of customer remediation and a software overhaul, the bank’s profit fell by 8.6% to $8.2bn as revenue fell by 4.2% to $17.2bn for the 12 months to 30 September.

Although the bank’s cash profit was still $5.097bn despite the 10.6% plunge, NAB – along with the rest of the banking sector – has been hard hit by the steady fall in interest rates over the past year.

NAB’s net interest margin – the difference between the interest it earns from loans and what it pays to fund them – declined seven basis points to 1.78%.

The full-year report blamed the weak operating environment for the “disappointing” result, with earnings declining across its consumer, corporate and business divisions.

Chronican will soon hand over to the incoming chief executive, Ross McEwan, on a permanent basis. He will then move into the chairman’s role vacated by Ken Henry, who also announced in February that he was standing down in the wake of the commission’s criticism of his leadership.

NAB’s poor results were widely expected by the market. Westpac announced this week that it had cut its dividend for the first time since 2009 as its cash profit fell 15%. The bank has also been forced to raise $2.5bn to meet regulatory capital requirements and legal costs related to its near $1bn customer remediation charges.







