October 15, 2018 / 10:18 PM / 9 months ago

UPDATE 2-NAB joins other Australian banks in refunding wronged customers

* NAB to book A$314 mln in refunds, compliance costs

* Follows rivals booking similar charges as inquiry roils sector

* NAB shares rise 1 pct, in line with market (Recasts adding context, fund manager quote and shares)

By Tom Westbrook

SYDNEY, Oct 16 (Reuters) - National Australia Bank said on Tuesday it would spend A$314 million ($224 million) on compliance costs and refunding customers it had overcharged, the fourth big Australian bank to compensate wronged customers amid a damaging public inquiry.

The refunds come as some of Australia’s biggest financial institutions face unprecedented scrutiny from the public, courts and lawmakers as the powerful quasi-judicial inquiry exposes large-scale wrongdoing across the financial sector.

NAB said some of the earmarked money would refund customers of its wealth-management unit who had been charged for financial advice they had not received.

“Where we have let customers down we are determined to put things right,” NAB chief executive Andrew Thorburn said in a statement. “We want to compensate them as quickly as possible.”

The refunds, compensation for customers and other compliance costs, will reduce second-half cash earnings in 2018 by about A$261 million, or 7.8 percent of cash earnings in the same period last year, and hit discontinued earnings by A$53 million, the bank said.

Australia’s Big Four banks are in damage-control mode after the inquiry, called a Royal Commission, released a scathing interim report describing a culture of greed across the sector.

A final report, that could recommend legal charges and a regulatory overhaul, is due in February, but the banks are already moving to save their reputations.

“It’s what they’re all doing,” said Hugh Dive, chief investment officer at Atlas Funds Management, which owns bank shares but not NAB stock.

“They don’t want the final findings to be particularly fierce, so they are getting out ahead of that now and refunding things and being contrite.”

The country’s largest bank, Commonwealth Bank of Australia , last week said it would refund charges amounting to A$45 million annually that it had levied to dead clients, and unwind its commission structure for financial planning products. Certain commissions were found by the inquiry to incentivise bad behaviour.

That came after Australia and New Zealand Banking Group said it would take a A$711 million hit to profit due to costs including compensating customers, and Westpac Banking Corp said annual cash earnings would fall by about A$235 million for a similar reason.

Those announcements have weighed on shares across the sector and traders have mostly priced in similar charges at NAB and CBA.

CBA is due to release a quarterly trading update on Nov. 7. NAB is due to report full-year earnings on Nov. 1.

NAB shares rose 1 percent in morning trade on Tuesday, as the broader market rose 0.6 percent.

$1 = 1.4023 Australian dollars Reporting by Tom Westbrook in SYDNEY. Additional reporting by Jose Koilparambil in BENGALURU; Editing by Stephen Coates

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