Drummond's on a fast learning curve
Clyne has been in the CEO's chair for 4 years already, and the succession window is open because NAB's shares have underperformed CBA, Westpac and ANZ as the search for a face-saving exit from the UK continues.
In Drummond he has hired someone who the market thinks has the ability and leadership skills to be chosen as NAB's next CEO - but there's not much time to give the new man the experience inside the group that he needs.
The position of chief financial officer is an important one, particularly because Drummond and the man he will replace later this year, Mark Joiner, also carry the title of head of strategy: the strategy unit reports to the CFO, and the CFO and CEO jointly present NAB's strategic plans to the board.
Drummond is a good choice for the CFO job itself. He is a chartered accountant who has led two significant financial operations in this country, Goldman Sachs JBWere and Bank of America Merrill Lynch, and he came to attention at Were by becoming Australia's top-ranked banking analyst - notable among other things for correctly calling NAB a "buy" and ANZ and Westpac a "sell" before ANZ and Westpac disclosed massive commercial property and takeover lending losses in the early '90s.
He understands how the Australian banks work, in other words, and also has a familiarity with NAB's history that draws on his years with Were. Were was NAB's main broking house for decades, for example, and when the then Goldman Sachs JBWere sold 80.1 per cent of its private broking and wealth management business in 2009, NAB was the buyer.
To get into the CEO succession race this time around Drummond probably needs to shift from the CFO job to at least one other senior management job before the CEO decision is taken by NAB's board. At Bank of America Merrill Lynch in Australia he oversaw banking operations including corporate lending, trade finance and leasing finance, but he did not run a retail banking unit, for example. A move from the CFO role to run NAB's retail bank would be a logical next step.
Given Clyne's already long tenure the change would need to occur relatively quickly, and possibly as soon as the end of next year after he completes one full financial year as chief financial officer. The existing retail boss, Gavin Slater, is another CEO contender and would also rotate on that scenario. But then again, the CFO slot would be free.
Drummond's career was built in broking and investment banking and he is familiar with two global financial giants, Goldman Sachs and Bank of America.
His appointment does not signal heavier NAB focus on investment banking, or renewed expansion overseas. NAB's unhappy experience with banking in the United Kingdom and write-downs that it took in its capital markets division during the global crisis have killed its appetite for expansion in those areas, and it is focused on disentangling itself from the UK, and building its domestic Australian banking and wealth businesses.
At JBWere, Drummond moved up the management ranks under Were's then boss, Terry Campbell.
The pair were key architects of Were's joint venture with Goldman Sachs in 2004, and Drummond led the integration of the two businesses before becoming boss of Bank America Merrill Lynch in Australia in 2009.
Goldman bought out the Were equity to move to 100 per cent in 2011.
Craig Drummond's chances of becoming CEO of NAB would not end if he was not selected by the board to replace Clyne. At 52 years of age he could be a contender the next time around, too.
The market's take on Wednesday was that he is in the current succession mix, alongside others including Slater, business banking boss Joseph Healy and enterprise services head Lisa Gray.
His broad knowledge of the financial scene here and his experience in restructuring financial houses certainly suggests he should be. But as I said, the timing is tight: a relatively fast rotation out of the CFO role will be the sign that he is in the hunt.
mmaiden@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
Craig Drummond is a chartered accountant with senior experience at Goldman Sachs JBWere and Bank of America Merrill Lynch in Australia. The article says he was hired because the market views him as having the leadership skills and financial experience needed for the CFO role and potentially as a future CEO candidate.
According to the article, NAB's CFO also carries the title head of strategy, meaning the strategy unit reports to the CFO and the CFO and CEO jointly present strategic plans to the board. That makes the CFO influential in shaping NAB's direction — a point everyday investors should note when assessing strategy and governance.
No. The article explicitly says Drummond's appointment does not signal a heavier NAB focus on investment banking or renewed overseas expansion. NAB is focused on disentangling itself from the UK and building its domestic Australian banking and wealth businesses.
The market views Drummond as part of the current CEO succession mix and as a potential candidate, but the article notes he would probably need to move from the CFO role into another senior operating job — for example running NAB's retail bank — to build the internal experience the board typically looks for. Timing is described as tight.
The article suggests that a relatively fast rotation out of the CFO role into an operating role (such as retail banking) would signal Drummond is genuinely in the CEO hunt. Such moves can affect market confidence and share performance because they change who drives strategy and finance at the bank, and they also create a vacancy in the CFO position that the market will watch closely.
The article lists several other executives thought to be in the succession mix: retail boss Gavin Slater, business banking head Joseph Healy, and enterprise services head Lisa Gray. It also notes Mark Joiner is the existing CFO who will be replaced later in the year.
Drummond has a background in broking and investment banking, led significant financial operations at JBWere and Bank of America Merrill Lynch, and was once Australia’s top-ranked banking analyst — including high-profile calls on NAB, ANZ and Westpac in the early 1990s. The article highlights his experience with restructuring financial businesses and integrating JBWere with Goldman Sachs as part of his qualifications.
Investors should watch whether Drummond moves from CFO into a senior operating role (the article suggests retail banking as logical), the timing of any executive rotations (possibly as soon as the end of next year), how NAB progresses with its UK disentanglement, and any board signals about succession — all of which could influence NAB's strategic direction and investor confidence.
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