NAB’s loss of Cahill creates problems for CEO Andrew Thorburn

Antony Cahill’s sudden departure as second in command at National Australia Bank less than a year into a $1.5 billion transformation plan creates a series of problems that chief executive Andrew Thorburn does not need.

Thorburn was under enormous pressure before Cahill opted to take a job in London thanks to the damning disclosures at the Hayne royal commission.

Counsel assisting, Michael Hodge, uncovered the bank’s blatant disregard for the interests of its superannuation clients and a slovenly approach to compensating customers.

NAB has disputed allegations by Hodge that it was involved in criminal activity.

NAB is playing down the significance of Cahill's departure. But that did not match up with Chanticleer's understanding.
NAB is playing down the significance of Cahill’s departure. But that did not match up with Chanticleer’s understanding.

Christopher Pearce

Nevertheless, it is clear that the bank repeatedly put the interests of commission-paid advisers ahead of its customers and it was less than frank in its dealings with the securities regulator.

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There is no doubt Thorburn’s tenure as CEO has been tainted by the royal commission revelations. The damage is made worse by the fact that he went out so hard proclaiming how NAB had rebuilt trust and changed its culture.

In this context, the last thing Thorburn needed was Cahill’s sudden departure to run Visa’s operations in Europe.

His leaving causes uncertainty in the minds of investors, upsets the bank’s already wobbly succession planning, and raises doubts about the smooth management of a key investment and cost-cutting program.

Thorburn has staked his job on delivering three things: $1 billion in cumulative cost savings by 2020; increased revenue and efficiency from the investment of $1.5 billion over three years; and remaking the NAB workforce by sacking 6000 people and creating 2000 new jobs.

Cahill, left, was talked about as a possible successor to Thorburn, but that discussion will now centre on Anthony ...
Cahill, left, was talked about as a possible successor to Thorburn, but that discussion will now centre on Anthony Healy, right, the chief customer officer, business and private banking.

Elke Meitzel

Last chance

It would be understandable if investors regarded this strategic shift as the last chance for a bank that has disappointed because of its propensity to over-promise and under-deliver over the past 20 years. NAB shares are the worst performing of the big four over the past decade.

On Tuesday, the bank played down the significance of Cahill’s departure. But that did not match up with Chanticleer’s understanding. It was made clear last year that Cahill was central to Thorburn’s move to simplify the bank and enable it to be part of the emerging ecosystems in financial services.

When Chanticleer visited NAB’s head office for a full day of briefings about the bank’s transformation strategy in November last year, it was Cahill who sat next to Thorburn to explain the future of banking.

Former NSW premier Mike Baird, now the chief customer officer, corporate and institutional banking at NAB, is also ...
Former NSW premier Mike Baird, now the chief customer officer, corporate and institutional banking at NAB, is also considered a possible successor to Thorburn.

Supplied

It was Cahill who was called upon by Thorburn to explain the importance of the “digital age” and the need for NAB to build a range of different skills. It was Cahill who talked passionately about the need for digital natives to “reimagine the digital experience”.

Cahill was responsible for products and pricing, technology and payments, innovation, NAB Labs and NAB Ventures, which was given $50 million to invest in cutting-edge start-ups. He was the executive called on to sit next to Thorburn at parliamentary grillings.

But NAB says the transformation program will not miss a beat given that the person in charge, Anne Bennett, remains in her job and delivering to tight milestones. She is executive general manager NAB Transformation and previously ran a finance transformation at Westpac Banking Corp from 1997 to 2005.

The bank points out that the NAB transformation is overseen by a steering committee comprising half a dozen people including Thorburn and the chief technology and operations officer, Patrick Wright.

NAB says the transformation program will not miss a beat given that the person in charge, Anne Bennett, remains in her ...
NAB says the transformation program will not miss a beat given that the person in charge, Anne Bennett, remains in her job and delivering to tight milestones.

Wright is said to be playing a leading role in the transformation. His division is employing hundreds of new software engineers.

Among highest paid

The committee includes Andrew Clark, the managing partner for Australia and New Zealand for Boston Consulting Group. He is “strategic adviser on the transformation” and will be working inside NAB until 2020.

Apparently this sort of secondment has become common for BCG partners in Australia and New Zealand over the past 18 months. Of course, it is unlikely to be accompanied by increased transparency about remuneration, even though Clark would probably be one of the highest paid executives working inside NAB.

Only one of Thorburn's 10 direct reports remains in the same position: David Gall, the chief risk officer.
Only one of Thorburn’s 10 direct reports remains in the same position: David Gall, the chief risk officer.

David Rowe

One way of looking at the BCG involvement in the transformation program is an insurance policy for a management team concerned that it did not have the skills to properly execute what has been promised to shareholders.

Lack of confidence within NAB about the ability to execute a project involving the expenditure of $500 million a year is understandable considering the bank’s past experience with large-scale change programs.

Thorburn’s predecessor, Cameron Clyne, stuck his neck out in 2013 with a promise to transform the bank’s technology platforms with the expenditure of up to $1.3 billion on the NextGen IT project.

This project was meant to deliver cost savings of $800 million at the end of the fifth year of implementation. But when the project was finally completed in 2017 the bank’s expenses had actually increased by more than $200 million to $8.5 billion.

NAB insiders say the NextGen project, which uses Oracle software, never delivered the promised benefits because of a lack of accountability among those involved and high staff turnover.

It is this high turnover of senior executives at NAB that has been one of the features of Thorburn’s tenure since he took over in August 2014.

Only one of Thorburn’s 10 direct reports remains in the same position: David Gall, the chief risk officer.

The executive team has been restructured at least four times, with several executives barely lasting two years in the same position before being moved to other roles. Perhaps this keeps executives on their toes and broadens their skills base.

Deliberate strategy

That could be a deliberate strategy to increase the options available to the NAB board when it considers succession planning. 

Cahill was talked about as a possible successor to Thorburn, but that discussion will now centre on Anthony Healy, the chief customer officer, business and private banking, and Mike Baird, the chief customer officer, corporate and institutional banking.

The revelations at the Hayne royal commission have badly damaged the reputation of the head of wealth, Andrew Hagger, who would previously have been considered among those vying for Thorburn’s job.

At the recent half-year results, Thorburn was optimistic about the progress of NAB’s transformation program.

“I think we’re on track with what we said we’d do,” he said. “You know, we’re six months in. We really want to become a simpler and faster bank. Focus on our business bank, focus on these growth opportunities we can see. I believe, more than ever, that this is the right plan to invest and simplify the bank.”

NAB hired about 500 people in the first half, so it is about a quarter of the way through its goal of hiring 2000 new people.

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