ME Bank CEO Jamie McPhee exits amid loan redraw furore

ME Bank chief executive Jamie McPhee has resigned his post as the bank battles to restore its reputation in the wake of its mortgage redraw controversy.

ME Bank CEO Jamie McPhee has resigned as CEO.

Outgoing ME Bank chief executive Jamie McPhee says his resignation from the post on Tuesday is unrelated to the redraw controversy the lender endured this year, as the COVID-19 turmoil further delayed a dividend payment.

Mr McPhee’s departure after more than 10 years in the top job comes after the industry superannuation-fund owned bank was entangled in controversy over abrupt changes to mortgage redraw facilities during the COVID-19 crisis.

ME chairman James Evans announced the resignation of Mr McPhee on Tuesday, effective from July 31, without making any reference to the redraw furore that caused a backflip in the bank’s policy. ME finance chief Adam Crane becomes acting CEO while a search is conducted.

“The 10-years was always a bit of a mental milestone for me,” Mr McPhee said in an interview, noting he was considering retirement after Christmas but delayed the decision because of the need to prepare for the pandemic’s fallout. “There is never a perfect time but I felt now was the right time.

“That (redraw) issue has really been dealt with.”

In May, the bank apologised to parliament for its home-loan redraw fiasco, saying it was right to protect customers from financial stress but fell short by not flagging the changes before they were made. ME changed customers’ ability to redraw funds from their mortgages without giving them ample notice, or in some cases any notice at all.

The policy was unwound after a heavy consumer backlash.

Mr McPhee admitted on Tuesday that ME got the communication wrong on the redraw change and said if he had his time over the bank would have conducted focus groups to first garner feedback.

“Run some focus groups, test and learn ... which would have landed well with the customer,” he said.

ME’s latest financial results showed statutory profit climbed 26 per cent to $52m in the six months to December 31, buoyed by growth in home loans and deposits.

Mr McPhee said the COVID-19 situation and renewed lockdown in Melbourne meant the bank would not pay a dividend for the 2019-20 fiscal year. He outlined that ME continued to have “growth aspirations” but with about 9 per cent of is loan book in repayment deferrals, and regulators treading cautiously, it was not the time to pay a dividend.

Mr Evans said Mr McPhee had made a “significant contribution” by transforming the scale and extent of the bank’s retail offering to customers.

“ME has increased significantly in size and relevance, growing its customer numbers from 234,000 to 542,000, and its assets by 50 per cent to almost $30bn. Notably, ME has continued to achieve primacy in customer satisfaction, based on Roy Morgan banking research,” he said.

“Importantly, Jamie has steered the bank through significant change in the industry and the macroeconomic environment.”

The controversy this year around ME, owned by 26 industry superannuation funds including AustralianSuper, HESTA, and Sunsuper, has stirred talk that many in the ownership group are pushing to sell the bank. The industry fund owners haven’t earned dividends from the investment.

Mr McPhee wouldn’t comment on whether an ME sale process was under way.

The Australian reported in May that the Australian Prudential Regulation Authority had a heightened level of engagement with ME over the past few years on the implementation of a new Temenos banking system. That included operational issues for some term deposit products and credit cards, which weren’t working properly. After a period of more active engagement with the regulator those issues were ironed out.

Mr McPhee said while all new products were on the new core banking system, the transition of older home loans would be done within 12 months. He labelled the project “unfinished business” but said he was glad ME had leaned in and made the investment.

On his departure Mr McPhee added: “In deciding to call time, I know the bank is in a strong position financially and is well placed for the future, but that the industry challenges ahead and resulting need for change, will require a long-term commitment. I believe now is the best time to hand over the reins to give ownership of the bank’s post-COVID strategy development and long-term execution to a new CEO.”