The dawn of a new era at NAB

It’s day one of Andrew Thorburn’s tenure as chief executive of National Australia Bank and he has already made a major declaration of intent.

While the departure of three of the bank’s most senior executives has a degree of mutuality to it, there’s no doubt that Thorburn wanted to make a statement that the group is starting a new era -- that he’s in control and that the pace of change is about to quicken.

There’s also a sense of generational change in the shake-up of the group’s senior management ranks announced today under which the highly-respected trio of Lisa Gray, Joseph Healy and Bruce Munro will depart.

Gray, who led the renaissance of NAB’s retail bank before being given charge of the group’s enterprise services and transformation programs, has made no secret within the bank of her desire to be a chief executive.

Healy, head of NAB’s core business bank, plans to take a six-month sabbatical lecturing in China while Munro, chief risk officer, is retiring.

A Healy protégé, Angela Mentis, has been given responsibility for the business bank. She was previously general manager of NAB’s private wealth business. Anthony Cahill has been appointed group executive product and markets, David Gall is the new chief risk officer and Renee Roberts takes over Gray’s role.

The changes highlight one of the benefits of appointing an internal candidate to succeed Cameron Clyne as NAB chief executive. Thorburn has worked with and knows all the senior management and therefore has been able to make an immediate and informed decision about the leadership team he wants.

The rest of his senior team -- Craig Drummond (finance and strategy), Andrew Hagger (NAB Wealth), Anthony Healy (Bank of New Zealand), Gavin Slater (personal banking) and Michaela Healey (people, communications and governance) remain in place.

In announcing the changes, Thorburn referred to a commitment to driving stronger results and returns for customers and shareholders and to 'sustainable change' across the group.

NAB’s Australasian franchise is in pretty good shape, although Thorburn would be aware that NAB Wealth, which Hagger is shaking up, needs a major lift in its performance. He’s also said to be keen to build on NAB’s sector-leading business banking franchise.

The big issue -- and he’s made it apparent that it is a priority issue -- is the long-standing drag on NAB’s performance generated by its UK banking franchise.

While the run-off of its non-performing commercial property in the UK is accelerating the ongoing banking business still significantly lowers NAB’s overall return on equity, which would be very respectable if the UK bank were excluded.

Thorburn has made it clear that he wants to act quickly and decisively to streamline NAB’s operations by shedding or exiting non-core operations, with the UK exposures at the top of his to-do list.

With the UK economic conditions improving and the recent successful spin-off and flotation of Lloyds’ TSB unit indicating that the market for bank assets has improved, Thorburn’s prospects of exiting the UK without doing too much damage to NAB’s balance sheet are considerably better than the conditions Clyne experienced. The future of NAB’s small Great Western Bank in the US is no doubt another issue he will consider.

Despite the fact that Clyne handed over a group that, while not without some issues, was in relatively good condition, Thorburn is clearly anxious and determined to make his mark on the organisation. 

He’s off to a fast and decisive start. All of NAB (and the market at large) now understands that with the formal handover from Clyne to Thorburn today, it is no longer business as usual at NAB.