And so we mark the end of a dream that an Australian bank might become a leading global financier for an industry we see as a major Australian growth area in the next two decades.
I am talking about the National Australia Bank’s dream to become a significant agricultural bank outside Australia. In 2007 the then-chief executive John Stewart gave the grand plan a start when he bought US agricultural bank, Great Western.
Stewart and his board identified that agricultural financing was an area where the bank had deep talents and where they could add real value in international operations.
You will remember in his KGB interview last week Seek chief executive Andrew Bassat, while urging Australian companies to think globally, emphasised there was no point going overseas unless you had skills that added value (KGB Interview: Seek's Andrew Bassat, August 29).
That’s exactly the mistake the NAB made decades ago when it went to the UK. There is not much Australia can teach the British about banking. John Stewart’s mistake was to try to extend the NAB’s northern UK operation to the south and NAB got caught with huge bad debts when the UK property markets slumped.
In the past half decade NAB has been struggling with its UK problems and the dream of being an international agricultural bank got caught up in the too-hard basket. The purchase of the US bank was to be just the start of a significant push into the global agricultural industry to become a rival to the global Rabobank. It was ambitious but it was exactly what NAB should have done had not the UK mire bogged it down.
New NAB CEO Andrew Thorburn could see no current value in the US bank being part of such a dream so NAB will float Great Western Bank and will later sell down. I can understand why he made the decision, but it is sad. Naturally most of our institutions rejoiced -- few can see value in ambitious growth plans.
But the formal end to the NAB dream happens just as the federal government is seeking to develop the north to take advantage of the rising Asian middle class (Andrew Robb: Time to reset the message, August 21).
NAB will be a player in that boom as a local bank, but nowhere near as powerful as it would have been had the Stewart vision been able to be implemented.
Once Andrew Thorburn rids NAB of the UK it’s back to the hard Australian grind of making NAB’s new technology work so it can be fully implemented; trying to stop Australia and New Zealand Banking Group and other banks taking market share from NAB in the business arena by being more optimistic about smaller business prospects; and, of course, grinding out money from commodity home mortgages. All Australian banks hope the Australian housing market does not suffer a setback that will lift bad debts.
There is nothing wrong with sticking with the practice of paying shareholders as big a dividend as you can, but NAB had a plan to be bigger than that and, sadly for Australia, the vision has been lost.
Footnote: And while ANZ has pushed hard into Asia, as planned, it has not been able to bring itself to the pay the prices required to make a significant Asian acquisition. The dream of having an Australian bank with a significant presence in Asia has not been lost but it is not nearly as advanced as many had hoped.