Funds push NAB on need for change

Under-fire National Australia Bank faces growing calls to make an external appointment as its next chief executive.

Mike Baird in Sydney yesterday. Picture: John Grainger

Under-fire National Australia Bank faces growing calls to make an external appointment as its next chief executive, drawing a line in the sand on the need for change after a chaotic week claimed its CEO and chairman.

Many investors and analysts see the best way forward for the bruised bank is to tap an external executive and experienced hand who can drive cultural and other change.

After enduring heavy criticism from the Hayne royal commission, NAB chief executive Andrew Thorburn fell on his sword on Thursday. The exit — which formally takes place at the end of the month — coincided with an announcement that chairman Ken Henry would also leave NAB once a new CEO was in place.

NAB non-executive director and former senior ANZ and Westpac executive Phil Chronican has agreed to serve as acting CEO.

“These things take time. We need to put a brief together for the search,” Mr Chronican told The Weekend Australian yesterday, noting that NAB was yet to appoint a headhunting firm. “It will unfold over a matter of months.”

Politicians also weighed into the wash-up of NAB departures, after the Hayne royal commission claimed its latest round of CEO and board scalps.

Bill Shorten seized on the exits, saying more needed to happen than senior banking executives quitting.

“If no one out of the banks goes to jail, if no one gets prosecuted or charged, I think Australians would see there has been a cover-up,” the Opposition Leader said. Josh Frydenberg said “time will tell” if more bank executives fell on their swords because of the banking royal commission.

Fund managers are leaning towards an external NAB chief executive appointment, following months of turmoil including disappointing performances by Mr Thorburn and Dr Henry at the commission, a fees-for-no-service scandal and a police fraud investigation that entangled the CEO’s former chief of staff and his office.

Tribeca Investment Partners portfolio manager Jun Bei Liu wants an external CEO, saying the NAB appointee would need to conduct a “thorough review” of the strategy, including the leadership team.

“I think it will be very difficult to argue for an internal appointment,” she said.

“They will have to get someone with a really good background to restore trust … this is really the ­beginning.”

The royal commission called into question the actions of then chief risk officer David Gall and chief legal and commercial counsel Sharon Cook. Former head of wealth Andrew Hagger exited last year.

Concentrated Leaders Fund chief executive David Sokulsky said NAB needed a strong leader willing to make “hard decisions” and implement them. “I would suspect that you’d want to go external,” Mr Sokulsky said.

Concentrated Leaders sold out of NAB last month after losing faith in management and estimating the bank’s royal commission costs and future investment spend would exceed what NAB was budgeting for.

Names tipped to be on a potential external candidate list for NAB include Medibank CEO and former NAB finance chief Craig Drummond, Westpac’s institutional bank boss Lyn Cobley, Royal Bank of Scotland CEO and former Commonwealth Bank executive Ross McEwan, and Westpac customer chief and former NAB executive George Frazis.

Another name that has been bandied around is CBA non-executive director Rob Whitfield, a director of NSW Treasury Corporation and previously a Westpac executive.

Internally, NAB business banking boss Anthony Healy and customer boss and former NSW premier Mike Baird are said to be the frontrunners. Mr Baird did not rule out throwing his hat in the ring, declining to comment when asked the question yesterday.

Other industry sources believe Mr Chronican could stay in the role.

NAB sources said the board nomination committee would meet next week to formalise the CEO search process. It is headed by Dr Henry.

Mr Chronican spent time yesterday speaking and meeting with the bank’s top leaders and a range of business units, including the small business contact centre.

Kenneth Hayne singled out Mr Thorburn and Dr Henry in his landmark report as the worst of the big banks’ leadership for accepting accountability.

JPMorgan analysts expect NAB will endure an extended period of “heightened instability” and CLSA analyst Brian Johnson said an external CEO appointment was preferable.