NAB has announced the departure of its chief executive Andrew Thorburn and chairman Dr Ken Henry following the release of Monday’s final banking royal commission report.
Mr Thorburn and Dr Henry appeared before the commission, and were named specifically in the final report, where Commissioner Kenneth Hayne said he was “not confident” either had learned from their past mistakes.
“I was not persuaded that NAB is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly,” he wrote.
In a statement posted to the ASX after markets closed on Thursday afternoon, Mr Thorburn said the bank had “sustained damage” as a result of the royal commission and he had “offered to step down” as a result.
National Australia Bank CEO Andrew Thorburn and Chairman Dr Ken Henry today advised they would leave the bank. Market Release here: https://t.co/zOI1QTcg5P
— NAB (@NAB) February 7, 2019
“As CEO, I understand accountability. I have always sought to act in the best interests of the bank and customers and I know that I have always acted with integrity,” Mr Thorburn said.
“However, I recognise there is a desire for change.”
NAB board member Philip Chronican, who has previously helmed ANZ’s Australian banking group and served as Westpac’s chief financial officer, will take over as interim CEO from March 1, the day after Mr Thorburn leaves.
Dr Henry said the board needs the opportunity to appoint a new chair “as NAB seeks to reset its culture”, but he will stay until a new permanent CEO is found.
“I am enormously proud of what the bank has achieved and equally disappointed by what the royal commission has brought to light in areas where we have not met customer expectations. Andrew and I are deeply sorry for this,” he said.
“My decision is not made in reaction to any specific event, but more broadly looking at the bank’s needs in coming months and years.”
Dr Henry appeared on ABC TV’s 7.30 on Thursday night, where he said he believed he was leaving the company in better shape than he found it.
Earlier, The Sydney Morning Herald reported that Mr Thorburn’s former chief of staff Rosemary Rogers allegedly rorted more than $500,000 from the bank to fund a holiday for her family.
In 2018, the masthead also reported that Mr Thorburn took a holiday to Fiji and accepted a Thermomix organised by Ms Rogers through The Human Group, an executive events firm under investigation over accusations it was bribing Ms Rogers to win contracts from the bank.
NAB’s shares were up 1.26 per cent on Thursday when they were halted at 3.15pm, after rallying 3.78 per cent on Tuesday following the release of the banking royal commission report.
An issue of culture
Speaking to The New Daily, IBISWorld senior industry analyst Tommy Wu said the changes are likely intended to “shake up the public perception” of NAB in the wake of Commissioner Hayne’s findings.
“The banks came out of [the royal commission] relatively unscathed in comparison with other industries,” he said.
“There were no specific recommendations to change any responsible lending laws or further tighten any lending practices. This change in leadership seems like something that’s more related to the culture of the bank.”
The announcement also follows a shareholder first strike at the bank’s December AGM in Melbourne, which saw an overwhelming 80 per cent of shareholders vote to scrap the bank’s executive pay structure.
That move from shareholders placed the board at risk of a second strike and a spill in 2019. Dr Henry, in his speech to shareholders, addressed concerns including the size of executive pay, the bank’s below-expectation share price, and the behaviour uncovered at the royal commission.
“The onus is on us to be better, faster and address the root causes of any issues so they never occur again. This will remain a focus of the board next year,” he said.
Trading update gets early release
In addition to the leadership changes, the bank also posted its first-quarter trading update, originally slated for release on Friday.
According to the update, the bank’s cash earning growth was down 3 per cent compared to its 2018 first-quarter results.
Chief financial officer Gary Lennon cautioned in the update that customer remediation programs, coupled with investigations into the bank’s compliance with regulation, create the potential for additional costs to weigh on the bank’s performance throughout 2019.
Unaudited cash earnings were unchanged at $1.65 billion, but unaudited statutory net profit was up half a billion dollars to $1.70 billion.