Andrew Thorburn CEO of National Australia Bank . Credit:Andrew Meares After offloading poorly-performing and non-core businesses since starting as CEO three years ago, Mr Thorburn said the future facing banks was one in which costs would need to be lower. "We're going to be disciplined on costs, and targeted on costs, and serious about costs. But I think it's about efficiency more than costs," Mr Thorburn told BusinessDay. "We need to be ready for a world where our competitors and maybe the growth outlook will be such that costs and efficiency will be at premium," he said. The overhaul is a sign of the "structural" or deep-seated change affecting financial services, as digital forces transform banks' internal workings, and lift competition from new rivals.

While fintech start-ups have so far taken only a small share of business from banks, he said that if a global technology company were to move into financial services it would be a "massive" change. The market has been calling for cost-cutting by banks, but NAB's share price fell 2.8 per cent, to $31.95. David Walker, large cap portfolio manager at Clime Asset Management, said NAB shares had slumped because the increase in costs expected over the coming years would likely drag on earnings per share. "The sharemarket is myopic. It's focused on the short term - the next profit result and the one after that," said Mr Walker, who holds NAB shares.



Managing director of White Funds Management, Angus Gluskie, said the bank's message to the market had been "complex," but its outlook appeared "subdued." "It was a reminder that the outlook is reasonably flat. There are a number of large spending commitments and investment commitments which the bank is look at," Mr Gluskie said.

The national secretary of the Finance Sector Union, Julia Angrisano, accused NAB of putting "technology and profits before people," urging the bank to retrain staff rather than make workers redundant. "NAB, along with the rest of the banking industry, has a long-term social responsibility to their workers. This is especially so in a period of intense digital disruption," she said. While banks have been shedding thousands of jobs in recent years, and this trend is expected to continue, NAB's move is the most dramatic change to employee numbers publicly announced by a major bank in recent years. Mr Thorburn said he wanted to be open with staff about the changes facing the industry. It would look to manage the job cuts by moving existing staff into new jobs where possible, and through natural attrition. Mr Thorburn said it had not identified which divisions would be targeted for cost-cutting, but some "traditional" parts of the bank may be affected. Its final dividend will be 99¢, the same as last year.

NAB employed 33,422 full-time equivalent staff at September 30, and the planned 6000 job cuts are equal to 18 per cent of its workforce. The bank expects to take a restructuring charge of $500 million to $800 million in the first half of 2018. It is establishing a program to help employees into new jobs outside NAB, he said. As part of the plan, NAB is aiming to cut the number of products it offers by half, and reduce the number of information technology systems it runs by between 15 and 20 per cent. Mr Thorburn said branches remained "important" because people still wanted to do key parts of their banking in person, but it was changing its branch network in response to the strongest areas of population and economic growth.

The restructure was announced as NAB reported profits in line with market expectations, with net operating income from interest and fees rising 2.7 per cent, and bad debt charges remaining at very low levels. The bank also announced head of business banking Angela Mentis would move to run NAB's Bank of New Zealand, while former BNZ boss Anthony Healy would take on Ms Mentis' former role.