Why NAB’s new CEO Andrew Irvine has a rails run if HSBC opts for an Australian sale

With everyone else too big or distracted, HSBC is NAB’s for the taking if the global giant decides to walk away from the local retail banking market.

National Australia Bank was buoyed buy its recent buyout of Citi’s Australian retail business. Picture: AFP

National Australia Bank’s newish chief executive Andrew Irvine is expected to be one of the first and only local bank bosses to take a look inside HSBC’s local business, if the London headquarters finally make the call to put its Aussie consumer bank on the block.

Just one year into the role, Irvine would be given a rails run at HSBC, giving him a business with more than $36bn in home loans and business lending matched dollar for dollar by deposits.

Any deal would be priced at $4.1bn-plus if HSBC hopes to get a premium to book value, but deliver NAB an opportunistic boost to its retail bank.

Latest accounts filed with ASIC show HSBC’s Australian business posted a profit of $409m for the 12 months ending March. That was up from $282m a year earlier. It had $34.3bn of personal loans and $3.3bn of business and commercial loans. The bank’s net assets were listed at $3.27bn.

National Australia Bank’s new chief executive Andrew Irvine has spent a career in business banking. Picture: John Feder

In London, Bloomberg reported HSBC is eyeing options for its Australian business, including a possible sale. It’s the latest in long-running talk over the future for the retail arm of HSBC’s Australian operations, which has been mooted to be on the market for years, with the global bank pushing ahead with a strategy to slim down and focus on core global markets in retail banking.

Any sale would be consumer banking only, with HSBC retaining its institutional and lucrative trade-related business. HSBC has declined to comment on the story.

Australia ranks as HSBC’s seventh-biggest market, behind France but bigger than Germany. In its 60 years here, HSBC’s Australian business has long been moved around in terms of its reporting lines, at times reporting directly through to London and otherwise being overseen by Hong Kong.

HSBC last year sold its Canadian operation to Royal Bank of Canada for $US10.1bn and has since sold consumer banking in France and in a monster deal offloaded its US mass market banking business three years ago. HSBC is also eyeing an exit from Germany.

HSBC is widely seen as NAB’s to lose.

However, Irvine, the career business banking specialist, will need to sell the strategy to his investor base about the merits of getting bigger in lower returning mortgages when all the action and returns are in business.

However, a closer look at HSBC will show the bank skews to high-net worth customers, and many represent small to mid-sized business owners that rely on the bank for trade links, particularly into Asia.

Despite dominating business banking, NAB has the smallest of the retail banking franchises and has drifted further behind after ANZ’s move on Suncorp.

NAB’s Irvine is said to be happy with the speed of the integration of a similar bite-sized deal three years ago, when then boss Ross McEwan swooped on the Australian consumer business of Citi. There, NAB paid $1.2bn, representing a deal pitched at just over book value. With $12.2bn in loans, including a large chunk in credit cards, and $9bn in deposits, it was a digestible acquisition.

The merger has been mostly bedded down, with smaller parts of the portfolio including unsecured lending moving across in coming months. NAB’s is expected to to get $50m in direct cost savings from the Citi business next year.

Global bank HSBC is said to be studying options for its Australian banking business. Picture: AFP

Commonwealth Bank’s sheer size would see it bump into competition barriers if it made a play for HSBC’s local business.

Westpac too would face similar issues, particularly in the markets of Sydney and Melbourne, where HSBC is stronger. At the same time, after more than 15 years, Westpac is still digesting its monster St George Bank buyout. With regulatory woes largely behind it, it means much of new chief executive Anthony Miller’s attention in coming years will be on the long overdue Unite technology simplification program. The addition of a new system into the Westpac mix would put this back years.

The fast-growing Macquarie Bank has been has plenty of momentum under its own steam using its digital-only strategy and is unlikely to opt for the distraction of a wholesale bank integration.

Finally, ANZ, while cashed up, has its hands full as it starts its $4.9bn integration of the Suncorp Bank, a program scheduled to take years. This year comes the tricky part of moving its existing customers onto the new ANZ Plus tech platform, so there’s plenty of execution risk.

At the same time, ANZ is feeling regulatory heat from several corners, and its investors won’t tolerate another distraction.

As a twist, the incoming ANZ chief executive, Nuno Matos, was a senior Hong Kong-based HSBC executive and was passed over to take charge of the global bank as chief executive last year. Matos takes charge from Shayne Elliott in July.

The top job at HSBC went to Georges Elhedery, who quickly outlined a sweeping overhaul, including a plan to dive his bank into an “eastern” and “western” operation. Under the structural carve up, Australia was set to be folded in to the Asia-Pacific arm of the east, that included all parts of Asia and Hong Kong. The western business is set to house HSBC’s UK, Europe and remaining Americas business.

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Originally published as Why NAB’s new CEO Andrew Irvine has a rails run if HSBC opts for an Australian sale