Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry claimed its latest scalp on Thursday, when National Australia Bank’s chairman and chief executive both quit.
CEO Andrew Thorburn will finish on February 28; chairman Ken Henry will go once a new permanent chief executive has been appointed, the bank says in a statement.
As an interim measure, board director Philip Chronican, a veteran banker whose previous jobs have included running ANZ’s retail and commercial businesses and being CFO at Westpac, will take over as CEO from March 1 until a permanent appointment is made.
NAB appears to have badly misjudged its tone in response to the Royal Commission, and as Euromoney reported earlier this week, had been singled out by Commissioner Kenneth Hayne, who said in relation to Henry and Thorburn’s testimony that “I am not as confident as I would wish to be that the lessons of the past have been learned.”
He added: “I was not persuaded that NAB is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly.”
Specifically, Hayne said Henry had been unwilling to accept criticism of the board, and Thorburn had dismissed the bank’s role in the fees-for-no-service scandal as “nothing more than carelessness combined with system deficiencies.”
Both men took exception and pled the opposite was true. But Hayne’s personal comments proved insurmountable.
On Tuesday, February 5, Thorburn released a video message to customers, pledging to embrace the recommendations in the Royal Commission, to report and regain customer trust. Clearly at that point, he was not planning to go; indeed, NAB made a statement to the Australian Securities Exchange to that effect the same day.
But the pressure over the subsequent 48 hours was intense, leading to the announcement at the close of trading in Australia on Thursday.
Thorburn said in a statement: “I acknowledge that the bank has sustained damage as a result of its past practices and comments in the Royal Commission’s final report about them.
“As CEO, I understand accountability.”
Henry, in the same statement, said: “I am enormously proud of what the bank has achieved and equally disappointed about what the Royal Commission has brought to light in areas where we have not met customer expectations. Andrew and I are deeply sorry for this.”
The two are the highest profile names to fall because of the Royal Commission, alongside AMP’s chief executive Craig Meller and chair Catherine Brenner, who left during the testimony phase of the commission in April.
Ian Narev, chief executive of Commonwealth Bank of Australia, left before the commission started but as a consequence of various reputational issues that the commission would in many cases go on to examine.
So far, ANZ – whose chief executive, Shayne Elliott, has taken a somewhat contrite position throughout the inquiry, and who is new enough in the CEO role (since January 2016) to avoid blame for much of the alleged misconduct – has survived without big losses.
Westpac appears to have come out in the best shape of the big four, being the only bank not named in the 24 instances of alleged misconduct Hayne referred to the regulators for possible legal action.
It is not unscathed – it has been under scrutiny for also being the only one of the big four not to begin selling its wealth management businesses – but will have been relieved to find that the Commission did not recommend banks that be forced to divest these businesses, contrary to widespread expectation.
NAB had already lost its chief customer officer and former head of consumer and wealth, Andrew Hagger, during the hearings, for trying to downplay the scale of the fees-for-no-service behaviour at the bank. Another executive, chief operating officer Antony Cahill, left NAB (and indeed Australia) during 2018.
When one considers that Hagger and Cahill were among the candidates Euromoney thought likely to succeed Thorburn in an article in February 2017, it is clear how much the bench strength of management at NAB has been depleted. Might this play to the advantage of Mike Baird, former premier of New South Wales, who became NAB’s chief customer officer for corporate and institutional banking in 2017?
If so, he should perhaps not expect to get rich quick. Last year, an extraordinary 88% of NAB shareholders voted against a remuneration package for NAB that would have included a A$2 million ($1.4 million) bonus for Thorburn.
So, what next? Chronican is a strong figure who has run institutional banking at Westpac, retail banking at ANZ, and has served as chairman of NAB’s risk committee, although that last one might not be quite the badge of honour it once was. He ought to have been a candidate for a chief executive role regardless; perhaps he could end up holding the NAB job full-time?
The argument against that is that it won’t offer quite the new-broom characteristics that the market wants to see, since Chronican was a board director and the board has come in for much criticism.
Indeed, the whole board – which also includes former PricewaterhouseCoopers big hitters David Armstrong and Anne Loveridge, Ipac Securities co-founder Peeyush Gupta, MyWave founder and SAP veteran Geraldine McBride, BNZ chairman Doug McKay, former Carnival Australia chief Ann Sherry, and RBS Asia specialist Anthony Yuen – could be up for review and replacement.
NAB said in today’s statement that it would bring on new non-executive directors this year, and establish a board committee for customer outcomes. Whoever is appointed will have a lot to do to regain public trust. NAB also announced today that it made a net profit of A$1.7 billion for the first quarter; nobody really noticed.