Heads may roll as NAB slammed

The tenures of National Australia Bank chairman Ken Henry and chief executive Andrew Thorburn were under a cloud last night.

NAB chairman Ken Henry and CEO Andrew Thorburn. Picture: David Geraghty

The tenures of National Australia Bank chairman Ken Henry and chief executive Andrew Thorburn were under a cloud last night after the Hayne royal commission lambasted them for not accepting “necessary responsibility” for the bank’s failings.

Investors and analysts have cast doubt over the ability of Dr Henry and Mr Thorburn to survive in their posts after the scathing review by commissioner Kenneth Hayne in his final report.

NAB’s board is due to meet this morning, although this has been scheduled for some time.

Mr Hayne singled NAB out for special attention, saying he feared there may be a “wide gap” between the public face of the bank and what it does in practice.

“NAB also stands apart from the other three major banks,” the report said. “Having heard from both the CEO Mr Thorburn, and the chair Dr Henry, I am not as confident as I would wish to be that the lessons of the past have been learned.

“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.”

Mr Hayne’s comments will add to existing pressure on NAB’s chairman and CEO after a number of scandals at the bank, including charging fees for no service and rampant misconduct in its mortgage introducer program. The bank also received a record strike against its remuneration report at an annual general meeting last year.

The criticism puts the focus on senior NAB executive Mike Baird, the former NSW premier currently running the bank’s retail arm who is widely seen as a contender to become the bank’s next chief executive. The head of business banking, Anthony Healy, is also regarded as a key contender.

After a bruising appearance at the seventh and final round of the royal commission, Dr Henry has now drawn further criticism, this time from Mr Hayne himself. That came alongside a swipe at Mr Thorburn, who has returned from extended leave to formulate the bank’s response to the report.

“I thought it telling that Dr Henry seemed unwilling to accept any criticism of how the board had dealt with some issues. I thought it telling that Mr Thorburn treated all issues of fees for no service as nothing more than carelessness combined with system deficiencies when the total amount to be repaid by NAB and NULIS on this account is likely to be more than $100 million,” Mr Hayne said.

He also cited a story revealed in The Australian about NAB urging bankers to sell at least five mortgages before Christmas, in the same week Dr Henry and Mr Thorburn gave evidence at the commission.

“Overall, my fear — that there may be a wide gap between the public face NAB seeks to show and what it does in practice — remains,” Mr Hayne said.

In a statement to the ASX, NAB last night said it would review the recommendations to “fully understand” the implications for the group before providing further updates.

Last year, the corporate regulator started legal action in the Federal Court against two entities in NAB’s wealth management ­division, NULIS Nominees (Australia) and MLC Nominees. The court proceedings relate to fees charged for services not provided.

Tribeca Investment Partners portfolio manager Jun Bei Liu said it would be “pretty tough” for both Mr Thorburn and Dr Henry to stay in their posts, following the royal commission’s final report.

“It will be challenging, given NAB is taking more of the brunt,” she said.

CLSA senior analyst Brian Johnson said Mr Hayne’s commentary on NAB would add to pressure for changes at the top of NAB.

“When NAB received the no vote in December 2018 we highlighted we thought they could need a rejig of the executive team, perhaps even poaching back (former finance chief) Craig Drummond,” he said.

The “specific [final royal commission] revelations about NAB, Andrew Thorburn and Ken Henry would only add to those pressures”.

When asked about Mr Hayne’s comments on NAB’s leadership, Australian Banking Association boss Anna Bligh said it wasn’t surprising that he “expressed his owns opinions on that”.

“What I know is that leadership of Australian banking industry accepts total and full responsibility of the failings … and responsibility to fix them,” she said.

The other three major bank chief executives weren’t spared attention in the final report even though NAB bore the brunt.

Mr Hayne noted that the banking regulator had taken Commonwealth Bank to task over its conduct and compliance issues, including an enforceable under­taking.

“I was persuaded that Mr Comyn, CEO of CBA, is well aware of the size and nature of the tasks that lie ahead of CBA,” he said. “None of the other banks have been confronted so directly.”

Westpac — which is seeking to retain the bulk of its wealth operations, unlike its peers — was called out for the commitment made by CEO Brian Hartzer to repair the bank’s relationship with the Australian Securities & Investments Commission.

“While I do not doubt Mr Hartzer, CEO of Westpac, when he says that Westpac has sought to ‘reset’ its relationship with ASIC, only time will tell whether that proves to be right.”

Westpac and ASIC faced off in court several times last year.

ANZ chief executive Shayne Elliott last night said the report “is a defining moment” for both the company and industry. “It has been a humbling experience for me, our leaders and all our people — we have learnt from this and accepted responsibility for our failings,” Mr Elliott said.

CBA chief executive Matt Comyn last night said “the royal commission has been a thorough and valuable process for everyone — bank customers, financial services institutions, regulators and policy makers.

“It has highlighted failings both in our business and across the wider financial services industry. As challenging as the royal commission process has been, CBA will be a better bank as a result.”