You can bank on big changes at NAB as new boss takes control

NAB chief executive Ross McEwan. Picture: AAP

Those expecting new National Australia Bank boss Ross Mc­Ewan to swiftly shake up his executive ranks can cool their jets.

This column understands McEwan’s first priority is getting a good grip on what the bank’s next strategy looks like, followed by how NAB should be structured to best achieve it.

The executive team and key decisions around senior managers will follow that, expected in the second quarter.

For the time being, McEwan’s team, with the assistance of consultants at Bain & Co, are immersed in a broad review of NAB’s business. And for those seeking insights into how Mc­Ewan may approach the task, a look at how he navigated his early days in top job at Royal Bank of Scotland is revealing.

A month after taking the reins as RBS chief executive in 2013, McEwan ­announced a spate of structural measures at the under-pressure bank including accelerating the divestment of Citizens Financial Group and setting up an internal “bad bank” to run down riskier ­assets.

He also outlined a “comprehensive business review” and said the cost-to-income ratio needed to be markedly improved.

It wasn’t until four months after he started as CEO that Mc­Ewan announced the results of the strategic review, sparking a realignment of RBS into three businesses: personal and business banking, commercial and private banking, and corporate and institutional banking.

At that point, RBS also told investors it would be rationalising and simplifying its systems.

The key difference for Mc­Ewan now is that he knows NAB less intimately, after only starting in December.

At RBS, he had the benefit of 14 months of executive service and in-depth insight into the bank’s inner workings.

McEwan has committed to seeing through NAB’s current transformation and cost-cutting program, started by former boss Andrew Thorburn. But given the bank’s regulatory woes, remediation charges and cultural challenges, the next leg of the strategy will be key.

McEwan gave investors some clues at the bank’s annual general meeting in December on how he views the status quo.

“We start from a very good position and an enviable position in areas like business banking,” he said at the time.

“We’ve got a very good corporate and institutional bank (and) we’ve actually got a lot of work we could do on the retail bank to actually make that a stronger player.”

McEwan also addressed the challenges confronting NAB head on. “We’ve got lots of work to do, but we’ve also got to think about what will this market look like at the five to 10-year point,” he said, admitting that NAB had lost trust and respect.

“We haven’t always done what we said we would, and this is unacceptable. I’m under no illusion about the challenges.”

McEwan told investors it would take three to five years to implement the necessary cultural change at NAB.

The bank’s issues include being hit in December by fresh court ­action by the corporate regulator alleging several thousand breaches of the law and unconscionable conduct in a longstanding scandal over charging fees where services were not provided.

NAB has also flagged that it has outstanding matters being assessed by financial crimes regulator Austrac.

The regulatory maze and strategic review mean McEwan is not short of near-term tasks, so getting his executive team locked down will take some months.

Cash grab

With credit growth in the doldrums, the big banks have reverted to a tried and tested cashback strategy to lure new home-loan customers, as well as those who are seeking to refinance.

The prize for those throwing the largest sums of money around, goes to NAB and Westpac-owned Bank of Melbourne, RateCity analysis conducted for this column shows.

NAB is offering $4000 in cash back to those refinancing their mortgage, while Bank of Melbourne is offering the same amount for the first property ­refinance when customers apply online.

Over at ANZ, there is a tiered structure, with the bank paying up to $3500 cashback on larger loan sizes from $700,000.

Interestingly, ANZ’s cash back offer is only available through mortgage brokers.

Westpac and Commonwealth Bank are separately offering a $2000 cashback deal, with the ­latter limiting the offer to those seeking to refinance.

The use of cashback deals to woo customers is not new, but as with most things in banking there is a pile-on once a couple start ­employing the strategy.

Six years ago there was also a wave of cashback offers that hit the market, with one non-bank lender going as far as offering fuel discounts to new customers.

Cashback offers do, of course, need to be weighed against interest rates and other terms so that borrowers are able to cut through all the marketing.

The banking sector will get a read on credit growth from the Reserve Bank on Friday, and given the positive surprises in economic data in recent days they will be hopeful the cash rate stays flat next week.