Australia’s newest big four bank boss has his work cut out for him

When ANZ Bank named Nuno Matos as its new chief executive in December, investors weren’t convinced that the former HSBC Holdings banker could easily turn around the lender, which is facing a litany of troubles.

With Matos set to start his role on Monday, anxiety is growing among ANZ’s senior executives that the 57-year-old Portuguese banker could take some forceful steps to clean up the Melbourne-based lender, including changes at the top echelon, to restore its reputation, according to people familiar with the matter.

New ANZ chief executive Nuno Matos.Credit: Aaron Francis

Part of the trepidation is due to his relatively unknown status within the country, said those people, asking not to be identified discussing a private matter. To the outside world, Matos, who has a formal demeanour and is rarely seen wearing anything but a dark suit, is known for his direct and detail-oriented style of management, according to executives who have worked with him.

That could stand him in contrast to an often more informal corporate culture in Australia.

Analysts and investors see much of the focus for Matos now on fixing issues in the firm’s institutional unit, where instances of bad trader behaviour including alcohol and substance abuse have prompted the regulator to impose punitive capital requirements on the bank. At the same time, Australia’s banking industry is grappling with margins crimped by falling interest rates and a fiercely competitive home loan market.

Matos has “a big task ahead of him”, said Matthew Haupt, portfolio manager at Wilson Asset Management, which oversees about $5.9 billion, including ANZ shares. There are “multiple angles” where he’ll need to improve the business and culture, he said.

A spokesperson for ANZ declined to comment.

At HSBC, Matos, who also worked at Spain’s Banco Santander, was praised for exits from some European markets deemed unprofitable and dealing with some of the issues at its then troubled Mexico business, according to the sources familiar with the matter.

Matos was appointed to run the British bank’s Mexico business at the start of 2016 and was promoted to lead Europe four years later, subsequently going on to head global wealth and personal banking.

The Mexico unit had initially struggled to overcome the stain of a $US1.9 billion settlement in 2012 by HSBC with US prosecutors for failing to prevent drug cartels laundering money. By 2017, a five-year deferred prosecution agreement expired, signalling the US was satisfied with improvements at the bank.

‘The focus on domestic growth is essential, especially as ANZ currently lags its major competitors in home loan market share.’

Lisa Barrett, analyst at S&P Global Ratings

ANZ now ranks as the fourth-largest bank in Australia, with a market capitalisation of about $87 billion, having lost out recently to Commonwealth Bank, and the country’s two other major lenders, NAB and Westpac. ANZ shares initially dropped for three straight days after the announcement of Matos being hired on December 9. The stock is up about 3 per cent so far this year.

“An external appointment is important,” said Jun Bei Liu, founder and portfolio manager at Ten Cap, an investment management firm with about $1.5 billion. “It’s positive, especially for an underperforming business like ANZ.”

Earnings results last week underscored the fierce competition in lending for homes and businesses as well as turbulence arising from shifts in global trade, as ANZ extended its share buyback period citing the uncertain outlook.

“The focus on domestic growth is essential, especially as ANZ currently lags its major competitors in home loan market share,” said Lisa Barrett, analyst at S&P Global Ratings in Melbourne.

Matos outside ANZ’s Docklands headquarters, where he will start work on Monday.Credit: Aaron Francis

Matos will also have to navigate the many markets ANZ operates in outside of Australia and New Zealand. ANZ’s overseas strategy drew scrutiny in the past under another ex-HSBC executive, Mike Smith, who was penalised by investors for accumulating assets in Malaysia, Vietnam, China and Indonesia that generated poor returns.

The banking regulator — the Australian Prudential Regulation Authority — last month slammed ANZ with an additional $250 million capital requirement after an independent review unveiled weakness in the firm’s leadership and a string of poor behaviour. With that extra capital buffer taking the total for the bank to $1 billion, Matos will face the challenge of trying to get that lowered in coming months.

“When you’ve got a regulator on your back, that’s a distraction,” Australian Shareholder Association chief executive Rachel Waterhouse, said in an interview.

“So you’d want to make sure that the organisation is responding appropriately, and you know the outcomes, and what that means.”

Meanwhile, some bankers who worked with Matos questioned his longer-term commitment to a much smaller Australian bank given the financier is known for his ambition to eventually helm a large global financial institution, some of the sources said.

Matos missed out on the top job at Europe’s largest lender to Georges Elhedery and doesn’t have extensive experience in Australia. One key task will be further integrating Suncorp’s banking arm into ANZ after the firm’s $4.9 billion purchase.

“The biggest challenges for Matos are integrating the Suncorp acquisition, while cleaning up the institutional bank issues,” said Matt Ingram, senior industry analyst at Bloomberg Intelligence in Sydney.

With Sharon Klyne and Anshuman Daga.

Bloomberg