BOQ’s Allaway says Frazis not ‘the right person to lead this change’

Bank of Queensland chairman Patrick Allaway says the board removed former chief executive George Frazis with immediate effect because he was not the right person to lead the bank during its next phase and to avoid him being a lame duck CEO, as it seeks to put less emphasis on growth.

BOQ shares fell sharply on Monday after the bank announced the surprise exit of Frazis, a former senior Westpac executive who has led the regional lender for three years.

BOQ chief executive George Frazis is departing after three years in the top job. Credit: Louie Douvis

Allaway, who will become executive chairman until a new CEO is found, said the board had decided a change in leadership was needed as it looked to “sightly pivot the strategy” towards strengthening the bank, while slowing its growth amid a more uncertain environment.

He said there was no particular issue that triggered the decision to remove Frazis, there was “no financial issue”, and the former CEO was not being terminated “for cause”.

Rather, he said that after considering the bank’s change in focus for a few weeks, the board had reached the view on Sunday that BOQ needed a change in leadership capability.

“George has many skills, but we didn’t think he was the right person to lead this change. And we are coming into a more challenging trading environment, and we felt it was appropriate, on balancing all those views, to do it now,” Allaway said.

“Once a board forms a view about different skills being required, that George wasn’t the right person to take us forward with this new chapter, we didn’t want him as a lame duck CEO while we ran a search, and we thought it was best for me to step in as an executive chair to get on with this and not put George in a position where it would be very difficult for him.”

Frazis, who did not comment on Monday, was announced as BOQ’s chief in mid-2019, when Allaway was chairman-elect. At its results last month, BOQ beat market expectations, and reported its integration with ME Bank, which it bought last year, was ahead of schedule. The bank remains in the middle of a digital transformation, as it tries to move some brands and products onto a new platform.

Allaway stood by his decision to hire Frazis and praised his contribution to the bank’s growth, including the ME Bank takeover.

“George was the right appointment. He’s made a material contribution to BOQ over the last three years. You’ve seen an underperforming bank return to growth across all our channels,” Allaway said.

However, he said the board was putting a greater focus on “strengthening the bank”, given the more challenging economic backdrop on the horizon.

Jefferies analyst Brian Johnson said BOQ’s references to strengthening resilience suggested there could be balance sheet implications for the lender. Amid growing risks of recession, Johnson said there could be regulatory pressure on banks’ liquidity, provisions and capital, and the immediate departure of Frazis suggested “a degree of urgency”.

“We find the immediate departure of the BOQ CEO troubling,” Johnson said in a note to clients.

Opal Capital Management Portfolio manager Omkar Joshi said the BOQ board did not appear to have a succession plan for Frazis, and having a chair act as CEO was a temporary or stop-gap solution.

“Generally if you’re looking to replace the CEO, you should have put some plans in place. But in their defence, he has only been there for three years,” Joshi said.

BOQ said Frazis would receive his entitlements in accordance with his contract of employment, and Allaway said the former boss would get nine months of gardening leave.

Some bank-watchers speculated relations between BOQ’s board and CEO had deteriorated, pointing to high turnover of executives and an Australian Financial Review report in March this year, in which Allaway publicly raised concerns about aspects of Frazis’ leadership.

Allaway said some people had been surprised at his comments in the article, but he said he had made it clear what his expectations were of the CEO. “George and I have had a very constructive working relationship, I’m very transparent with him,” Allaway said.

BOQ’s share price has dipped during Frazis’ tenure as CEO, from $8.83 when he started in the job to $7.56 on Friday, but fellow regional Bendigo and Adelaide Bank is also down over this period. The stock was 5.4 per cent lower at $7.15 on Monday afternoon.

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