ANZ: Drums beating on Mike Smith’s early exit

As much as Mike Smith might protest, the drums have started beating on an early departure for the combative CEO.

ANZ Bank chief executive Mike Smith had a simple and direct ­answer yesterday to suggestions that the bank’s board had overruled management on the bank’s $3 billion capital raising. “Crap,” he said, with characteristic bluntness.

“Capital management has to be formulated and recommended by management, which the board then considers.

“There’s absolutely no dissent between either.”

As much as Smith might protest, the drums have started beating on an early departure for the combative CEO.

In February, The Australian ­revealed that the board had kicked off a search for a successor, with Smith himself having indicated last September that he expected to remain at the bank for “around ­another two years”.

The ANZ chief is hardly in wind-down mode.

However, each strategic development — and its presentation — is now viewed through the prism of succession.

Yesterday, chief financial officer and internal CEO candidate Shayne Elliott hosted the analyst call for the capital raising.

The fact it wasn’t Smith, who was otherwise occupied in a board meeting, was a topic of much ­discussion and conjecture.

“It was purely a logistics thing,” he explained. “And it wasn’t like it was a massive rights issue; it was a purely pragmatic and well-considered capital raising, and to be honest I didn’t want it to attract undue attention.”

As for the rumours that Smith had been “rolled” by chairman David Gonski on the need for a stronger balance sheet, the reference point was the CEO’s scornful commentary last May on self-interested analysts behaving like “lemmings” when it came to predictions of large-scale capital raisings.

On July 20, when the prudential regulator called for more capital to be held against home loans, ANZ said blandly that it had a number of options, including internal capital generation, balance sheet management and the sale of non-core assets.

Suggestions yesterday of a rift between the board and management relied partly on reports that a group of institutional investors had visited ANZ late last week, and had left with the clear impression that the bank felt it was adequately capitalised for the time being. In hindsight, perhaps more weight should have been attached to Elliott’s July 21 video interview on the bank’s corporate website, bluenotes, when the CFO spoke of a range of options, including an equity raise, to bridge any perceived capital shortfall.

For Smith, the bank has been quite consistent in its approach — the whole capital adequacy issue has a long way to run, so ANZ refuses to “jump at unknowns”.

There were no surprises, he said, in the regulator’s call last month for higher mortgage risk-weights, apart from the compressed implementation period to July 1 next year.

This had put pressure on the timetable for the planned sale of some Asian partnership interests, and ANZ didn’t want to be seen as a forced seller.

Smith was at a loss to explain the swirling rumours and innuendo.

“I really don’t get it,” Smith said.

“How could a company of our size not have management backing for a capital raising?”