Nobody dared say it of course, but Westpac chief executive Gail Kelly, who presented a tepid interim result this week, may not be still in the top job this time next year. Waiting in the wings is Brian Hartzer, a little-known American who has taken a substantial financial hit to return to Australia.
Hartzer's arrival is a coup – if an elongated one – for former Westpac chairman Ted Evans, who began the search to replace Kelly more than a year ago, and had the former ANZ retail chief signed up since last November.
Ironically, Hartzer's delay should improve his prospects because he has been tasked initially to revive the expanded retail bank... and that's the very part of Westpac that disappointed most in the last six months.
Westpac's margins are down and lending to key areas such as small business is also lower. Moreover, there are clearly problems in the St George subsidiary while the revival of the Bank of Melbourne brand has been a very expensive and still unproven exercise.
On the other hand Kelly's admirable tenure in the chief executive role has been distinguished by exceptional prudence. Westpac's cost-to-income ratio is a rock-bottom 41 per cent – the lowest of the 'big four' – a factor which may well give Hartzer some room to invest.
Hartzer returns to Australia after the best part of four years at London-based RBS, a bank that became a byword for the greed that riddled British banking during the GFC. Hartzer, however, represented a new
regime at this 'bad bank' – his experience in the recession-ridden UK will be invaluable. Moreover, his 'retail wealth' division reported a 45 per cent increase in profits in the government-controlled bank's last result.
We don't know the details of Hartzer's salary package but in a note to RBS annual accounts in 2009 it's clear that in walking away early from RBS he is now also walking away from the bulk of the shares he was to be granted in a performance based package. Hartzer was originally to receive a combined total of 4.9 million RBS shares, the bulk of them (2.8 million) were due to 'vest' on August 17 this year. In quitting London for a return to Australia he will lose the rights to the last batch of shares, valued at roughly $1.25 million (800,000 sterling) at current prices.
Not that everyone is a Hartzer fan: Dyed in the wool bankers don't like the fact this 43-year-old Princeton graduate came originally from consultancy. Some analysts are also uncomfortable with his zeal for public profile. Hartzer was on Twitter before most bankers knew it existed, and more recently a severe bicycle crash prompted him to write a treatise on bike safety which he posted on his Facebook page.
But for now he looks unassailable as the popular candidate for Westpac's top job.
As for the public profile, he can't even wait to begin in his new role. Fulfilling a long-held promise to indigenous leaders in Victoria, Hartzer gives the annual Dungala Kaiela Oration in Shepparton on May 30, weeks before he officially begins his new job.
Westpac's next CEO Hartzer times it right
Brian Hartzer, the American tipped to replace chief executive Gail Kelly, joins Westpac at the perfect time – and he has foregone at least $1 million to do so.
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