CBA sights a bright Asian horizon

When Ralph Norris succeeded the long-serving David Murray as chief executive of Commonwealth Bank in 2005, the foundations of the bank CBA has become had already been laid.

That's not surprising because those foundations were purpose-built for Norris.

Murray, who had presided over a massive $1.5 billion or so re-engineering of CBA's technology platform and its processes, made no secret of the fact that his ambition was to create the settings within the bank that would enable it to pursue the customer-oriented strategies Norris had pioneered, with dramatic success, when he headed CBA's New Zealand subsidiary, ASB Bank, through the 1990s.

Norris has not only realised most of that ambition – driving a virtuous circle of customer satisfaction, higher productivity and competitiveness and financial performance – but added to his predecessor's momentum and gained industry leadership for the group with the acquisition of BankWest, on opportunistic terms, during the financial crisis.

Despite the crisis, CBA's earnings have grown from about $3.5 billion when he started to more than $6 billion last year and CBA has produced stellar performance statistics.

Having completed the transformation of the bank that Murray started, Norris, as has been expected for some time, will retire on December 1.

The only surprise in today's announcement was that the head of CBA's retail bank, the affable and very capable Ross McEwan, isn't his successor, as had been widely expected. Instead, the CBA board has opted for its head of business and private banking, Ian Narev.

Narev, the bank's former head of strategy, is already being likened to National Australia Bank's Cameron Clyne, both because of their relative youthfulness (Narev is 44) and because they both came to their banks from consulting backgrounds. Narev is a former McKinsey consultant to financial institutions.

NAB chose Clyne over more experienced bankers because it wanted someone who could create and implement a new strategy for the group.

At face value CBA doesn't need a new strategy – its core businesses are very strong – but the bank's board may have felt it needed someone to map out its path for the next decade or so, leveraging from that strong new base that Norris will leave.

CBA already has a reasonable footprint in Asia, where Narev has had experience, and he referred to his ambition of continuing to move "selectively" into the region today.

He also referred to "rapid change" in the domestic and global economies.

The banking sector is moving into a quite different era, one of low credit growth within a restructuring domestic economy and with a weak and volatile global economy and financial system. Within Asia, however, the prospects are strong.

To add to the challenges, all the banks can see in front of them for the rest of this decade is higher capital charges and liquidity requirements, uncertain access to funding, more intrusive and restrictive regulation and the continuing politicisation of the sector.

Charting a course through the complexities surrounding them will require very strong and very strategic leadership for the major banks. In choosing Narev, CBA obviously believes it has appointed someone capable of navigating CBA through that next phase of its development.