NAB’s CEO challenge is being a leader, not a line manager

NAB Group chief executive Andrew Irvine was promoted to the top job in April last year. Picture: NewsWire/Tertius Pickard

Andrew Irvine returns to Australia this weekend and back to work on Monday morning after a winter break.

And after being back home enjoying the Canadian summer in recent weeks, the National Australia Bank chief executive faces a brewing storm.

Irvine has been under scrutiny for the past week for his enjoyment of a drink at client and private bank functions.

No specific complaints about his behaviour had been raised.

But the issue about his drinking at events was reportedly noted during a meeting with fund managers on June 10 with the bank’s chairman Phil Chronican and three others from NAB, including seasoned director Simon McKeon.

It is understood the concerns were not advanced during the formal leg of the meeting with investors, however it was enough for Chronican to discuss the matter with Irvine.

The reporting about Irvine’s leadership style has been the spark that caught fire in banking circles, namely because there had been growing unease about his ability to transition from line manager to chief executive.

Shares in NAB initially fell as much as 3.5 per cent, although they have recovered through the week. The bank’s shares have lagged behind the other big four banks so far this year.

Where Irvine was regarded as a very good business banking executive, he’s yet to define himself as a leader of a big four bank that spans $420bn of mortgages, New Zealand banking and dealing with the very big end of town.

The leadership role at the top is vastly different from sitting on the executive team. It involves intensive stakeholder management across thousands of staff, the board (including Chronican, himself a highly-experienced former banker) government and, of course, customers.

Adding to the pressure, Irvine’s appointment follows in the footsteps of a supremely experienced former bank boss, Ross McEwan.

National Australia Bank’s long-held position as business banking leader is under threat. Picture: Getty Images

NAB was McEwan’s second time around as a chief executive, with his first stint a repair and rebuild job of near-collapsed UK lender RBS in the years following the GFC. McEwan was by far the most experienced of the Australian big four bank bosses when he started at NAB in late 2019.

Since being elevated from business banking executive to chief executive in April 2024, Irvine has struggle to communicate his own strategy, given so much of NAB’s current settings were inherited from the all-dominant McEwan.

The bigger issue is Irvine has found it hard to let go of his old job as a business banking boss, where he relished constantly being on the road meeting clients.

Even this year, Irvine has been spending as much time as possible outside NAB’s shiny new Bourke Street offices and meeting customers, particularly in regional Australia. In March, shortly after his quarterly results, he went on a multi-day tour of Newcastle and the Hunter Valley where he was meeting most of his former business customers. He’s been up and down the East Coast preferencing clients, putting some big investors offside.

To be effective, good CEOs also need to be surveying the entire field, not just stay in the trenches.

Compounding the issues around leadership has been the high level of top executive turnover since he took charge. While it’s not unusual for senior executives to move on after a new boss takes charge, Irvine mishandled his first major test – the replacement of his own role. Business banking is the single most important unit at NAB.

Irvine initially moved the well-regarded retail banker Rachel Slade into the plum job. Slade had been a contender for the CEO position. Less than a year in, with market share in business banking starting to drift, Irvine pushed Slade out of the bank, replacing her with an old Canadian colleague, Andrew Auerbach.

It was a captain’s pick to be sure and a surprising one, given Auerbach had been out of banking for several years, and had been running his own wealth management firm for two years. The turnover risks the loss of momentum and Irvine was also down a well regarded retail banker.

Andrew Irvine, centre, pictured in February 2024 with NAB chairman Phil Chronican, left, and outgoing CEO Ross McEwan. Picture: Eamon Gallagher

Irvine, however, was left reeling following the defection of Nathan Goonan as NAB’s chief financial officer to the same job at Westpac. An exit that senior is extremely rare in Australian banking, with a CFO often seen by investors as sometimes more important than a CEO.

Goonan was replaced by seasoned NAB executive Shaun Dooley, on an interim basis.

The test will be in the numbers. For a year now, NAB had been lagging its rivals in business lending growth and margins in business banking were showing signs of pressure, suggesting competition was starting to bite.

NAB has everything to lose in business banking, given it’s the biggest player, with a market share of just over 21 per cent. Commonwealth Bank is closing in on 19 per cent. After dominating the market for decades, losing the lead would shake NAB to the core. It’s not only pride at stake, business banking is almost three times more profitable than selling home loans and deposits to retail customers.

In May, Irvine said he was anticipating a pick-up in growth for the rest of the year helped by a “record pipeline” of forward orders.

Chronican was already aware of feedback around Irvine hitting his stride as CEO, and NAB’s leadership team have been getting executive mentoring, with Irvine getting intensive focus. He has given the chief executive feedback around drinking at client events.

Leadership mentoring is not uncommon for first-time chief executives and continues a tradition set by McEwan, who was a strong advocate for executive leadership training at the bank. It is understood Irvine and McEwan remain close.

One former banker points out plenty of big personalities have come through the Australian industry, and even today, drinking is a big part of the business banking where many other industries have moved on.

Bankers such as Irvine live their jobs, and this means drinks with dinner or lunch at client or internal events, nearly daily. One fund manager pointed out Irvine was picked as CEO because he’s good with client relationships.

The 49-year-old Irvine is cut from the old school of Canadian banking, where everything is all about balance sheets and client relationships. Competition in Canada is intense – particularly from US lenders. He is less comfortable talking about the softer edges of corporate culture.

In private, Irvine is forthright with opinions, at times verging on brash. His views are shaped from what he has been hearing among small and mid-sized business owners in the five years he’s lived in Australia. He’s on the record criticising the high cost of doing business, bureaucracy and shortage of skilled workers. He recently said he was surprised by the attitude of many Australians toward big business or aspiration, where “profit is a bad word”.

Still, in the same discussion, he said Australia “is one of the best places in the world to live and work”.

“What I hear about from customers is they want things to just be easier. They want clarity on the tax environment. They want clarity around policy settings, and they want it easier to do business,” he has told The Australian.

Irvine is scheduled to appear at a public session on Wednesday as part of his role as the rotating chairman of the Australian Bankers Association at the organisation’s annual conference. The Australian has reported Irvine won’t be attending the conference dinner and networking function, although this scheduling had been planned for some time.

Following this week’s initial reports about Irvine, Chronican held an “informal” meeting with several board members this week, not the entire board. This part of a governance measure to firstly discuss what was raised and, secondly, as a recollection of the June 10 meeting. There were differing accounts about how directly the matter of Irvine being told to curb his drinking had been pressed to Chronican. If there are issues requiring deeper intervention, Chronican will need to say so – not only to investors, but to regulators.

A NAB spokesman declined to comment on what was raised around Irvine or discussions with the board. However, the spokesman said Irvine had the board’s support.

“Andrew Irvine and the NAB leadership team are delivering sound financial and operational results. They are executing on a refreshed strategy focused on further improving customers and colleague outcomes. The board’s support for Andrew and his team is unchanged.”

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