Inside the game plan of NAB’s new CEO Andrew Irvine

NAB's new chief executive, Andrew Irvine, has unveiled his first set of results as the bank’s boss. Picture: David Geraghty

Newly-minted National Australia Bank chief executive Andrew Irvine has spent the past four weeks visiting every floor of every one of the bank’s offices up and down the east coast of Australia and in Auckland, New Zealand.

Irvine took charge of the nation’s second-biggest bank at the start of last month, and has barely been in the Melbourne office that former boss Ross McEwan used to occupy.

It’s typical of a quintessential business banker who prefers being on the road, on the ground with clients, than being at the desk answering internal emails.

As well as meeting hundreds of bank staff face to face, Irvine also carved out plenty of time to listen to customers. There’s more to come with back-to-back meetings of customers scheduled for coming weeks.

This is the management style to expect in coming years from the 48-year-old British-Canadian chief executive.

“Let me tell you very clearly, I’m still going to spend lots of time with customers, because that’s who I am,” Irvine tells The Australian.

“That’s where I learn about how we going, I get energy from them, and customers want to see the boss. And the troops want to see me out and about to so I’m not going to end up in an ivory tower. I can promise you that”.

National Australia Bank will continue to drive its simplification agenda. Picture: Kelly Barnes

This is the first insight into what to expect from the former Bank of Montreal executive, who for the past four years has been running NAB’s flagship business banking book before being promoted to replace the hyper-experienced McEwan. The message about the transition from McEwan to Irvine is to expect more of the same from NAB.

That is no major pivot in strategy; a low appetite for acquisitions; while repeating the former boss’ pithy mantra of doing the basics well. There will be some refining of existing strategy but that will be “evolution, not a revolution”.

Irvine comments came as he delivered NAB’s first set of accounts as chief executive. Although his appointment was announced earlier this year, the numbers for the half-year to the end of March were all owned by McEwan.

The 12.8 per cent drop in cash earnings for $3.55bn for the half was a solid but uninspiring result, marked by ongoing but easing margin pressure and a slowdown in loan growth. Lending losses continue to be subdued, but show signs of picking up in home lending and business as interest rates bite.

NAB surprised by topping up its monster buyback program by an additional $1.5bn while the dividend of 84c a share was slightly higher than expected.

This suggests the bank is not anticipating a sharp jump in lending losses, despite the higher-for-longer outlook for interest rates. It also means lending is set to slow from here on, and NAB has little else to do with its surplus capital.

Irvine’s former business unit posted flat underlying earnings of $2.59bn, representing nearly 45 per cent of group’s underlying earnings. Lender growth came in at 8.6 per cent.

Irvine says NAB will continue to skew to allocating more funds into business banking where the returns are running higher than consumer banking.

NAB shares closed up 1.5 per cent on Thursday, helped by the buyback and signs of stability in margins.

Fast start

Irvine already has got off to a fast start, moving early to get his top executive team in place. Significantly, Irvine appointed NAB’s well-regarded retail banking boss, Rachel Slade, into his former job as head of business banking, which is NAB’s biggest driver of earnings.

Slade’s move into the plum job was significant, as she was also in the internal running for the chief executive post. Although the business banker was always going to have the edge, the appointment is designed to keep her talents at NAB.

Irvine inherits a bank that has probably been in its best shape for more than a decade, although he is set to face two big challenges through his tenure.

The most immediate is external, and that will be steering NAB safely through what could still be a rocky economic environment.

Already, some economists are tipping the next moves in interest rate rises could be up – or at least hold high for longer – as the Reserve Bank seeks to stamp out inflation. That would put a further squeeze on already under-pressure households and could make all the difference between tipping Australia into recession.

The second challenge is internal and could be harder to anticipate. NAB has a long history of being accident prone and, it remains to be seen whether the stability under McEwan is the new normal, or if the bank slips back into its old ways.

For Irvine, the career business banker, his own challenge will be to keep his eye on other parts of the organisation – specifically NAB’s smallish retail bank that faces multiple pressures from margins being crunched and soft customer satisfaction rankings.

Irvine says he plans to continue McEwan’s drive on simplification, which has played a big part in its more stable footing.

NAB’s business banking unit delivers almost half of its underlying earnings. Picture: Morgan Sette

This also involves getting rid of practices, processes and policies which get in the way of NAB’s bankers, Irvine says. It also means embracing digital tools such as fully automated home loans which vastly speed-up activity.

“The simpler we are, the better we will be for customers,” he says.

He echoes McEwan’s sayings about getting the basics right and treating every dollar of capital “like it’s our own”.

He also reckons the economy has more resilience than most give it credit for and continues to expect a soft landing over any shocks. Indeed, he says that during March NAB had the strongest forward demand for business lending on record, a metric he says is “frankly astonishing” based on where Australia is in the economic cycle. This puts him on the more upbeat side over the outlook compared to his rival bank bosses.

Given Irvine has spent the past four years at the coal face with business customers, for now he has the advantage over most bank CEOs of having the first-hand picture of the economy.

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