Ross McEwan saved the NAB. He’s a tough act to follow

To suggest that National Australia Bank’s retiring chief executive Ross McEwan was the 166-year-old lender’s saviour might seem like a stretch. But in the investment community, this view is unanimous.

Over the past 20 years, only a handful of chief executives in major companies have commanded such respect or have been bestowed such adulation.

Andrew Irvine will replace Ross McEwan as NAB chief executive.

Timing wise, McEwan couldn’t have picked a better moment. With a softening economy, expectations that bank industry earnings are about to come down and a sense of mission accomplished, McEwan gets to pick up the pace of his weekend cycling speeds, become a better grandad and join a couple of boards.

That said, inheriting a basket case bank and turning it into a strongly performing enterprise is a sure fire way to attract attention and groupies. Inheriting a well-oiled corporate machine, which his successor Andrew Irvine will do, makes it harder to get noticed or excel.

Until McEwan arrived at NAB four years ago, the bank’s previous two decades had been marred by a series of mistakes, mishaps with a dollop of scandal and an abundance of underperformance.

In those 20 years, NAB’s share price experienced rollercoaster movements but no growth. By contrast, the Commonwealth Bank’s share price soared 250 per cent over that same time while Westpac and ANZ shares gained 120 per cent and 134 per cent, respectively.

Inheriting a well-oiled corporate machine, which Andrew Irvine will do, makes it harder to get noticed or excel.

Described variously by analysts as a “shit show”, NAB – more than any of its large peers – needed resuscitation.

Enter Ross McEwan, who was headhunted to run NAB in the aftermath of the 2019 financial services royal commission – so credit for its revival must also be given to NAB chairman and fellow native New Zealander Phil Chronican. As veteran career bankers, the pair became the dynamic duo of Australian banking.

Curiously, McEwan and Chronican were both passed over for the top job at the big banks where they had previously held senior executive positions. McEwan was considered a shoo-in for the top job at the Commonwealth Bank in 2012 – but was beaten by Ian Narev.

Chronican was the favourite to replace David Morgan as head of Westpac in 2008, but instead Gail Kelly was headhunted from St George for the role.

Over the past three years, NAB’s business lending has grown 31 per cent.Credit: Oscar Colman

McEwan made reviving NAB look easy as an old-style banker, who believes the basics of banking haven’t changed in 100 years and that only the delivery mechanism is different. When he began in banking, cheques and cash were king – but digital technology has made both these next to redundant.

McEwan is all about keeping it simple, and getting back to the core and the basics of what banks are supposed to do. His trick has been not to overcomplicate things, but do the basics well.

Under McEwan, NAB sold out of non-banking businesses including wealth management – or, as he likes to say, “we got rid of the hobbies”.

“We have stayed in the swim lanes that we have chosen,” McEwan said on Wednesday. “Losing focus is a really big threat for the bank.”

NAB’s biggest swim lane has been business banking. Don Argus, who retired as the bank’s chief executive back in 1999, is credited for setting the bank’s business division agenda.

One of McEwan’s primary and ultimately successful goals was to restore this division’s performance. It wasn’t without a fight. Recently, NAB needed to battle the Commonwealth Bank, which had set its sights on the small to medium-sized enterprise market.

In the end, NAB held its own and grew banking for small and medium enterprises – and the Commonwealth Bank’s growth spurt in this sector came at the expense of ANZ and Westpac’s market shares, analysts say.

In the past three years, NAB’s business lending has grown 31 per cent, with the division’s underlying profit up 38 per cent over the same period.

Part of its ability to rebuff the attack from CBA can be attributed to Irvine, who has been running this division and has not only grown lending, but also improved deposits and transactions.

Thus, it is no accident that he was first in line when it came to replacing McEwan. That said, it must be considered bad luck for Rachel Slade – the highly-regarded boss of NAB’s retail banking division.

Irvine certainly faces challenges. McEwan is a hard act to follow.

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