Australia's business commentators rate new National Australia Bank chief financial officer Craig Drummond as a legitimate chance to succeed current boss Cameron Clyne. While Clyne isn't going anywhere yet, the Bank of America Merrill Lynch recruit has the necessary experience in the industry. What he needs to do now is build his understanding of NAB. Australia’s business commentators say Drummond rates well against the other internal rivals to succeed Clyne, while noting that no imminent changeover appears on the cards.
Also in this morning’s edition of The Distillery, the latest inflation figures have the commentators somewhat split over what the Reserve Bank of Australia can and/or should do at its next monetary policy meeting.
But first, The Australian Financial Review’s Chanticleer columnist Tony Boyd says Drummond has the skills and career experience to consider himself a possible replacement for Clyne, who has been in the top job at NAB for four and a half years.
“The only missing piece from Drummond’s curriculum vitae is a stint running a retail bank. But retail banking experience is not a prerequisite for the top job in Australian banking, judging from decisions made in recent years by NAB, ANZ Bank and Commonwealth Bank of Australia. Drummond has a proven track record as a chief executive even if it is in the rarified and cut-throat world of investment banking.”
Fairfax’s Malcolm Maiden notes that the CFO position is an important one, as it also comes with the head of strategy role. The strategy unit reports to the CFO, and the chief executive and chief financial officer jointly present strategy to the board.
“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.”
Business Spectator’s Stephen Bartholomeusz observes that NAB forked out $6.5 million to make up for lost incentives at Drummond’s previous employer, which underlines just how much they wanted him for the job.
“While there is no suggestion that Clyne’s four and a half year tenure as chief executive of NAB is likely to end imminently (despite continuing market reservations about NAB’s performance during that period) it is obvious from the price NAB was prepared to pay to get him that Drummond will be one piece of NAB’s succession strategy. There are others – Joseph Healy, Lisa Gray, Gavin Slater, Andrew Hagger and Andrew Thorburn are the names most often cited as future contenders – but Drummond’s experience as chief executive of a sizeable financial services business, his hands-on experience of integrating different types of financial services businesses and his reputation for being able to assemble and manage talented people make him a very viable candidate.”
Fairfax’s Adele Ferguson writes that the news happened to emerge on the same day that her newspapers were reporting Clyne has ranked in the bottom quartile of the Corporate Confidence Index that benchmarks the perception of company management amongst analysts and fund managers.
“The survey also failed to disclose the ranking of NAB's senior management, which means they also ranked in the bottom quartile. The CCI, which has been tracking investor perceptions for more than two decades, is tightly circulated at board levels, cannot be copied and participants are subject to a confidentiality agreement.”
Indeed there is a desire for change at NAB amongst some big investors, which The Australian’s John Durie picks up on in his column.
“One appointment is not going to change the bank overnight but some were hoping NAB chair Michael Chaney could pull out a Jamie Dimon-like character from left field to excite the market. But what is likely to be a long, slow climb out of the economic gloom suggests that won't happen any time soon. Chaney has decided now is not the time to hire a change agent and will clearly monitor the 52-year-old's progress to determine whether he can replace Cameron Clyne as boss.”
The other big story from yesterday was the latest consumer price index data. Fairfax’s Tim Colebatch reports that the scare campaign waged by Opposition Leader Tony Abbott against the carbon tax has been thoroughly undermined by the latest inflation numbers.
“Some wrecking ball that was! Australia's first year with a carbon tax has ended with inflation so low that it was only the carbon tax that kept inflation from falling out of the Reserve Bank's target range.”
Carbon tax or not, the Reserve Bank is hardly a lock to cut interest rates next month with inflation within range, according to Colebatch’s colleague Michael Pascoe.
“At an average of 2.4 per cent, the Reserve Bank’s two core inflation measures remain comfortably within the target band and would allow the central bank to cut rates if it felt the need, but 2.4 per cent certainly doesn't compel it do so. Unlike some previous CPI prints, there's no reason to think inflation is about to fall further. Indeed, a key factor in keeping the rate down in the June quarter – lower fuel prices – will reverse sharply in the September period.”
But that doesn’t mean it shouldn’t, claims The Australian Financial Review’s David Bassanese.
“Barring a sudden lurch lower in the Australian dollar to much below 90 US cents, the Reserve Bank of Australia should – and most likely will – cut interest rates by a further 25 basis points at the August policy meeting. Of course, there’s a longer than usual delay between this week’s inflation results and the next RBA policy meeting (the first Tuesday in August is more than a week away), meaning there’s a greater than usual chance that other events could intervene. But, on balance, given the soft local economy, the case for a rate cut currently looks fairly strong.”
The Herald’s Sun’s Terry McCrann isn’t firmly in the same boat as Bassanese, but is open to the idea of a rate cut in August.
“An interest rate cut remains very much ‘live’ at the next Reserve Bank of Australia board meeting in two weeks. Indeed, a rate cut is arguably the ‘no regrets’ option. And it could be ‘demanded’ by the RBA's updated forecasts for the economy, which will surface three days after the meeting. They will show the Reserve Bank expects growth in the economy to remain significantly below trend and inflation comfortably within its target band, through the rest of the financial year.”
Elsewhere, The Australian’s economics editor David Uren laments the imminent arrival of pork barrelling, an inevitable cling-on when a poll is due.
And finally, Fairfax’s Elizabeth Knight wonders whether it’s time for corporate Australia to return some coin to shareholders.