For Australia’s bank CEOs, disaster is in the eye of the beholder

Bank CEOs Shayne Elliott, Peter King and Ross McEwan have made differing assessments of the coronavirus economy.

The playbook for chief executives in the depths of a crisis is brief and to the point: accentuate the positive and downplay the negative.

The other option, for more adventurous CEOs, is the triple somersault with pike: skate around the issue, but never compromise your integrity and authenticity.

Both strategies have been implemented in the major-bank interim reporting season, along with an outlier performance from ANZ Bank CEO Shayne Elliott.

Elliott tends to write his own rules, which coalesce into a high-risk strategy of maximum authenticity.

While he might be vindicated by a long and laboured recovery from COVID-19, the ANZ boss’s regular crystal-ball gazing makes him the most pessimistic of the major-bank CEOs by a long stretch.

Westpac CEO Peter King, who announced a 62 per cent slump in half-year profit to $1.2bn, drew extensively on Monday from the industry’s dog-eared playbook.

He was mid-range on the likely severity of the COVID-19 impact, but accentuated the positive by highlighting the scale of the Morrison government’s support packages.

Ross McEwan, in his debut result as National Australia Bank, wound up for the triple somersault with pike, and almost pulled it off.

Elliott’s prognostications on ANZ’s move to defer the decision on its half-year dividend were extreme, but probably mirrored the private thoughts of most experts.

“We’re just saying: ‘Unfortunately we’re in the eye of a storm, the greatest uncertainty that’s faced the economy since the Great Depression’, ” Elliott said.

“We’re saying: ‘Today is just not the right day to be making a decision about writing a cheque for a billion or $2bn’.

“Now I understand that many people rely on that.

“But, you know, what kind of bank would we be to write a cheque out for a billion or $2bn to our shareholders only to put us in harm’s way because the economy gets worse over the next three weeks or three months?”

For good measure, he almost ridiculed the notion of a robust, V-shaped economic recovery.

“Why?” Elliott asked himself rhetorically.

“Because our economies are open and very, very dependent on exports and tourism and migrants and foreign students and all of those things, which are great.

“But we can’t solve this on our own, and until the world has solved the problem and the world has gone back to normal and we have a vaccine that’s widely available, many of those industries cannot go back to normal.”

Effectively, McEwan’s acrobatic response on the same issue was: no one knows so why bother asking?

“A bank as ours needs to be ready for anything thrown at it and I think that’s what we’ve tried to do,” he said of NAB’s reduced dividend and $3.5bn capital raising.

“Given our scenario planning, we don’t know whether it will be a ‘V’ or a ‘U’; everyone’s hoping it’s a ‘V’, so plan for the worst and hope for the best.”

In the current environment, it’s hard to avoid the negative.

King acknowledged the COVID-19 elephant in the room, saying the half-year result was the most difficult that Westpac had seen “in many years”.

But he also accentuated the positive - about the only positive - by stressing the importance of the government support packages.

“We are in the middle of a once-in-a-lifetime event,” the Westpac CEO said.

“The impact is rapid and in many cases severe.

”But the scale of the government stimulus is unprecedented, so we see a sharp economic contraction with strong stimulus so we have a pathway for activity to come back.”