The National Australia Bank expects to write down $106 million from its development of a mortgage origination lending platform for its UBank subsidiary, and a total of $297 million pre-tax for capitalised software from the past financial year.
The bank today revealed that an internal review had found instances where the benefits of certain software were substantially less than anticipated, the costs of development were higher than expected, and there was uncertainty over whether some capabilities would even be deployed.
As result, the bank will write down $297 million worth of capitalised software assets.
Of the total amount, $106 million relates to the bank’s NextGen technology transformation - specifically a mortgage lending origination platform at NAB subsidiary UBank.
The bank started to build the platform but did not complete it after deciding to deploy resources into its Oracle-based core banking overhaul instead.
“Because we’re not going to get the benefits from the original piece of work, we decided to impair it. We may come back to it but at the moment, that’s the way it stands,” NAB CEO Andrew Thorburn told analysts today.
NAB used UBank as a testbed for its shift to the Oracle core, migrating the online-only subsidiary across first in 2012.
Thorburn and NAB group executive of finance and strategy Craig Drummond stressed that the impairment charge did not relate to the core banking platform.
“The rest of UBank, other than mortgage origination, is on NextGen. So you shouldn’t read into this any strategic shift of substance, because the rest of UBank is operating well on NextGen,” said Drummond.
The $106 million pre-tax impairment charge for the UBank mortgage origination platform represents around 10 percent of the total capitalised software balance for NextGen, the bank said.
NAB is currently about halfway into its now ten-year technology transformation project - the scale of which has doubled in time after suffering under scope creep and improperly mapped system dependencies.
The project, while attempting a significant overhaul of NAB's core banking system, will also touch nearly all areas of technology across the bank, including data centres, desktop, call centre, networks, online and mobile banking and credit and general ledger systems.