Westpac’s Brian Hartzer suddenly a lot less secure at the top

Westpac chief Brian Hartzer. Illustration: Eric Lobbecke

Austrac’s landmark legal action against Westpac is yet to be tested in court, but already the writing is on the wall for chief executive Brian Hartzer because the allegations just add to a litany of failures within the bank.

It may not happen overnight, but Hartzer seems destined to join Ian Narev and Andrew Thorburn as big bank bosses who have departed in the past 18 months — leaving ANZ’s Shayne Elliott as the sole survivor.

Hartzer, it should be noted, is in no hurry to leave, stressing on Wednesday that his focus was on getting to the bottom of the mess.

One of the many troubling aspects of Westpac’s defence is that it followed the CBA case and clearly knew what it was up against, yet it still let it come to this. Just what were the Westpac board and management thinking as they issued their pro forma disclosures about the pending action?

The trouble from a shareholder perspective is that this debacle follows the litany of mismanagement snafus exposed during the royal commission, from liar loans to stealing money from clients.

Some in the market wonder how Hartzer has survived this long. The bottom line for investors is that the very same Australian banking oligopoly that prided ­itself on escaping the impact of the global financial crisis is now being caught in the same regulatory backlash faced in the US.

The Australian bank remediation bill is so far tipped to hit $10bn, but the US banks paid $US321bn in fines and you get the sense the costs are going to continue to rise in Australia. APRA already has a $1bn management overlay or capital penalty against Westpac and other banks, and what odds this increases in the wake of Wednesday’s disclosures?

The New Zealand regulator will also take a look because, in case no one noticed, bank regulators are on the warpath — and this is just the beginning.

That is the collateral damage the Westpac board must consider in shareholders’ interests as they monitor developments.

Westpac recently raised $2.5bn to cover remediation issues and it has consistently flagged ­potential Austrac penalties, but whether the warnings were as ­severe as what emerged on Wednesday is another question al­together. The regulator cited “indifference by senior management and inadequate oversight by the board”. Class action lawyers will be taking a close look at just what Westpac said and what has emerged.

Clearly, the money raised this month will not cover the several hundred million dollar-plus penalty to be paid by Westpac when it settles the Austrac action.

CBA, which didn’t go close to Westpac’s 23 million breaches and had thieves in hoods stuffing cash into a machine, but no child ­exploitation accusations, paid $700m to settle.

Importantly, we are dealing with allegations from a regulator that are ­untested in court and everyone deserves a fair trial. But we are not strictly dealing with the legal system here — it is public company governance and it will be remembered that then-NAB chairman Ken Henry and chief executive Andrew Thorburn were effectively hanged by a damning paragraph from royal commissioner Kenneth Hayne.

No one, apart from maybe the board, knows what else Hayne had in his mind when he singled out the bank. Either way it was the end of the employment for both.

CBA’s Narev left before the settlement.

Westpac chairman Lindsay Maxsted doesn’t have the luxury of a Phil Chronican on his board, an experienced, highly regarded bank executive, but his old KPMG colleague, Peter Nash, would be the most likely to step up if changes happened at board level.

Consumer boss David Lindberg is the heir apparent should Hartzer fall on his sword.

Hartzer is publicly ignoring sug­gestions his job is on the line, saying his focus is to sort out the ­issues. He handled Wednesday’s media conference well, noting he was “personally disgusted and ­appalled” at the claims money not reported by Westpac was used to facilitate child exploitation.

He also noted 99 per cent of the money transferred without adequate controls were pension payments remitted from Europe.

Hartzer has also made a series of management changes in risk management, financial crime and institutional lending, which covered the key problems areas.

The immediate outcry from the royal commission has also ­quietened, but the stench of this saga will linger while Hartzer stays in the job — unless he pulls some real rabbits from his hat.

Trust in technology

Microsoft chief Satya Nadella has a simple model when doing business, saying he is successful if his customers are successful.

He spoke at a luncheon in Sydney on Wednesday as part of a two-day trip to the city, which will be followed by a one-day whirlwind tour of New Zealand before returning home.

“Success is a structural headwind,” he said, “overcoming that is a test on long-term success.”

As a global company, he added, “I don’t have a licence to operate unless I contribute positively to the local economy.

“The next phase of globalisation is based on more equitable local growth.”

Nadella said he did not frame success by measuring it against competition “but what your own technical capability is”.

Asked about the next big thing, he said it was edge of the cloud and cited local company Willow as being in the right end of the market.

The issue for Microsoft is “which company will you help”.

At a time when the big platforms like Google and Facebook are under regulatory attack, Nadella declared “our currency is trust. Without it we have no business. Our core principle is to build trust in technology.”

He distinguished Microsoft from competitors such as Facebook, which he calls aggregators, and his own cloud base, which he calls a platform.

Microsoft has a total shareholder return over the past year of 20.7 per cent and 25.1 per cent over five years after reporting a profit last year of $US16.6bn on revenues of $US110bn.

Moorebank up and running

Qube chairman Allan Davies will use Thursday’s annual meeting to confirm that the company’s $2bn Moorebank logistics centre is ­operational, with trains running from the beginning of this month.

The company has done well in filling booths, with Target and other clients in place so the eastern side of the facility is now full and the west side is filling up fast.

The site covers 243ha, which is roughly the size of the Sydney CBD. The project dates back to Chris Corrigan’s reign at Patrick.

Patrick was acquired by Toll in 2007 and the land in question was acquired by a Westpac property trust with other investors along the way, including Stockland and Aurizon.

When the Patrick team re-formed under Qube and Maurice James, it repurchased the land and its start now cements what is the biggest investment in the company’s history.

The project team claims it will remove more than 3000 heavy truck movements from Sydney streets, cut 110,000 tonnes of carbon and create 6800 jobs.

The park also ranks as one of the country’s biggest solar farms.

The bottom line is that after all the talk, Moorebank is now up and running.