Staff cuts expected at Australia's biggest bank

ELIZABETH JACKSON: Australia's biggest bank has a tough week ahead as it prepares to reveal the extent of planned job cuts and announce that it will probably be a disappointing half year profit.

It's expected that the National Australia Bank will announce that it will have to cut about 2,000 staff in Australia. Unions are concerned that other banks might follow the NAB's lead, shifting some positions to countries such as India where wage costs are lower.

Brendan Trembath reports.

BRENDAN TREMBATH: The National Australia Bank plans to cut jobs in mail handling and cheque processing, giving the work to other companies. And some jobs will be lost as the bank combines businesses, such as retail banking and wealth management.

The Finance Sector Union fears more than 2,000 jobs will go. Paul Schroder is National Secretary.

PAUL SCHRODER: The discussions that we've had with the bank to date indicate to us that they are looking at a really substantial overhaul of the bank. Usually that's code in banking parlance for major job losses.

BRENDAN TREMBATH: The National Australia Bank is already cutting about 1,700 jobs in the United Kingdom. It's all part of a restructure to attack a slump in earnings. The bank's share of the lending market has declined, and last year it lost $360 million in unauthorised currency trading. Four traders and their boss were fired.

The Finance Sector Union's Paul Schroder says the union's worried Australia's biggest banks see big savings in shifting behind the scenes jobs to countries where wage costs are lower.

PAUL SCHRODER: It's a major risk to our whole industry, this idea of globally outsourcing. It's cheaper to employ someone in India, it's cheaper to employ someone in the Philippines, and we say that these iconic Australian companies have an obligation to invest in Australian skills and in Australian jobs.

They made $3.18 billion last year, they are a very profitable bank, they're in a privileged position. Of course the bank needs to look at its systems and its processes to make sure that they're efficient. But what we would say is that the bank is understaffed in customer service, it's understaffed in a range of areas.

BRENDAN TREMBATH: Brian Johnson, JP Morgan Australia's banking analyst says the National's given few clues about the size of the half-year profit it's due to announce on Wednesday.

BRIAN JOHNSON: The only guidance we have is that earnings will trough in this half, which means that they will be really, really, bad. And it's not only to do with basically the foreign currency loss.

A lot of this is to do with the fact that previous management at NAB appear to have been basically running down the quality of the balance sheet to inflate near term earnings. The price for that is being paid in this result.

ELIZABETH JACKSON: JP Morgan Australia Banking Analyst Brian Johnson with our reporter, Brendan Trembath.