What is weighing on the NAB share price?
Shares in the Big Four bank have rebounded nearly 20% in the last 6 months.
Shares in most of the major banks were trading slightly lower on Monday, but the losses in National Australia Bank (ASX: NAB) were particularly conspicuous. At the time of writing, the NAB stock was down 2.8% to $26.75.
Why is the NAB share price under pressure?
Investor sentiment has likely turned weaker after Australia’s third-biggest bank found itself firmly in the cross sights of the financial crimes regulator.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) on Monday said it has identified serious concerns with the bank's compliance with anti-money laundering and counter-terrorism financing laws and had begun an investigation.
The regulator said it had concerns over "potential serious and ongoing non-compliance" with customer identification procedures, customer due diligence and compliance.
NAB had self-reported the shortcomings in its anti-money laundering systems to the regulator in 2017 and has been engaging with AUSTRAC since then on strengthening its processes.
NAB CEO Ross McEwan said the bank would continue to cooperate with AUSTRAC in its investigations.
“NAB takes its financial crime obligations seriously. We are very aware that we need to further improve our performance in relation to these matters. We have been working to improve and clearly have more to do,” he said in a statement to the ASX.
Enforcement costs loom
AUSTRAC has not made any decision about whether or not enforcement action would be taken, the lender said on Monday.
The regulator is not considering civil penalty proceedings at this stage, which was "reflective of the work undertaken" by NAB to date, it added.
However, investors are likely not convinced that this would be the end of the matter. A similar case involving bigger rival Westpac was settled last year with the lender agreeing to a $1.3 billion penalty in a case involving millions of anti-money laundering failings.
While the Westpac case cannot be taken as a precedent for NAB’s dealings with AUSTRAC, investors would be rightly worried about any looming costs related to the case.
That could take the shine off NAB, which last month reported a half year statutory net profit of $3.2 billion, more than double the $1.3 billion recorded during the same period last year.
NAB shares have jumped nearly 20% over the last 6 months as investors bet the impact of the coronavirus downturn is behind the lender.
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