The most significant aspect of Cameron Clyne’s technology and strategy update today isn’t the technology piece but the human dimension. Clyne has significantly re-shaped his senior management team, albeit with a quite substantial missing piece.
While the new structure will simplify NAB’s superstructure in line with its ambition of simplifying its product suite and processes, the absence of a named successor to retiring finance director Mark Joiner will be noted by the market.
Joiner, after seven years at NAB, will leave before the end of the year with Clyne saying NAB would conduct an internal and external search for his replacement. For an institution as large as NAB not to have a succession plan in place for such a pivotal position within a financial services group is unusual.
Joiner is one of two key departures. The other is Steve Tucker, previously in charge of NAB’s wealth management businesses. Tucker is well-liked within the industry and has pioneered more customer-friendly policies within the sector but the core MLC business hasn’t yet performed to the expectations NAB had when it acquired it from Lend Lease in 2000.
He will be replaced by the highly-regarded former PricewaterhouseCoopers partner, Andrew Hagger, who was recruited to the bank by Ahmed Fahour (now chief executive of Australia Post) nearly four years ago.
Hagger, currently responsible for people, marketing and communications, previously had an 18-month stint heading up MLC’s insurance operations and before that NAB’s private and institutional wealth business and so has some relevant experience. While it will be a challenge for him to generate some growth and momentum in the wealth management businesses, he is seen as a talented executive with a lot of career upside.
Other key changes see industry veteran Rick Sawers being given responsibility for all NAB’s products, as well as its markets division; Lisa Gray, who’s made a success of personal banking, taking charge of the technology transformation and Gavin Slater, who previously led the technology strategy, replacing her. Joseph Healy will have Asia, private banking and financial institutions added to his role as head of business banking.
The technology strategy is not dissimilar to what NAB’s peers are doing as the big banks seek to replace myriads of legacy systems with new platforms that give them a clearer view of all of a customer’s interfaces with them and which allow them to transaction digitally and in real time. There has been a massive shift in customer behaviour towards online banking and mobile banking in particular.
NAB has been progressively rolling out the platform within its UBank online brand and plans to shift the rest of its customer bases onto the new platform over the next three years, starting next year with its personal customers. It hopes to decommission its legacy systems after 2016.
Clyne says that by the end of the fifth year of the program NAB will have cut $800 million a year from its cost base but in the process will invest more than $1 billion a year. The savings, he said, would be partly offset by higher software amortisation charges, reinvestment and implementation costs.
While NAB would continue to manage to achieve positive ‘’jaws’’ (where the growth rate in revenue is greater than the growth rate in expenses), with implementation costs included in cash earnings this was less likely to be the case this financial year.
NAB’s Australian business has actually been forming quite solidly during Clyne’s four-year period as chief executive, with solid earnings growth and some real momentum within what had been an underweight position in retail banking.
It is its UK banking business which has dragged down the group’s performance and which will continue to weigh on returns unless and until there is some turnaround in the recessed UK economy – at which point it is probable NAB would try to exit that market.
NAB has done what it can to lower the risk profile of the UK business, with its commercial property book taken onto the parent balance sheet and placed in run-off mode and a major restructuring/downsizing of the UK operations underway.
The weight of the UK baggage means Clyne has no real option but to try to drive the Australasian businesses harder in a low-growth environment, particularly as his major competitors also have major cost-reduction and technology-driven business simplification programs of their own.