Passing the Baton
Shares in National Australia Bank (ASX.NAB) inched slightly lower after CEO Ross McEwan announced his retirement with plans to fully step down at the start of April. McEwan was appointed CEO back in 2019 during a difficult time for the bank and has since steered the ship in the right direction with the shares up some 20% during his tenure. McEwan will be replaced by Andrew Irvine, the bank’s group business and private banking lead. Today, we take a look at the update and what this could spell of NAB.
Update – CEO Retires
As noted above, NAB CEO Ross McEwan announced his intention to retire from his role as CEO – expressing his desire to spend more time with family. McEwan was appointed CEO back in July 2019 in a difficult time for the bank which faced years of underperformance not to mention the aftermath of the Hayne Royal Commission that lead to then-chairman Ken Henry and then-CEO Andrew Thorburn.
McEwan eventually stabilised the bank and won over stakeholder support through strategic reforms, organizational realignment. The result was a bank focussed on simplification, customer service, and talent development – and so far has been paying dividends (real and figurative). McEwan’s retirement marks the end of an era but, we believe, he won’t be gone for good considering that he did express desire to explore Board positions.
That said, Andrew Irvine the Group Executive of Business and Private Banking has now been appointed as the Group CEO. Mr Irvine has an impressive background having a long tenure in the Financial and Management Consulting industries. Before Joining NAB, Irvine was the Head of Canadian Business Banking in the Bank of Montreal – one of Canada’s largest financial institutions – as well as previous experience with McKinsey & Company, Lycos Europe, and Credit Agricole.
Irvine definitely has big shoes to fill and inherits a bank poised for further expansion – at least the foundation laid by McEwan is very strong. Under Irvine, we believe that NAB will continue its transformation and, likely, see continued efforts to strengthen the business banking and may even take top spot from CBA in this category. Irvine will take over the CEO role from McEwan on April 2.
There are also other challenges which include further improving the digital experience – a key area given that product distribution has become more complex for banks in a market that is already intensely competitive.
On the compensation package, we believe that this is a fair mix of fixed ($2.5mn/year) and variable components with the latter linked closely to the bank’s overall performance and long-term success. We reviewed the terms and believe this would align Irvine well with shareholders.
Overall, we’re pleased with this appointment and look forward to how Irvine will shape NAB.
Summary
The announced retirement of Ross McEwan marks the end of an era having stabilised the bank as well as placed reforms that form a strong foundation for incoming-CEO Andrew Irvine. Irvine inherits a bank poised for expansion. We believe that Irvine is the right choice, though, considering his customer-centric focus – highly important in the business banking market – not to mention his strong track record in banking and management consulting.
In the meantime, we maintain our HOLD rating on NAB (ASX.NAB). It will remain firmly held in the Fat Prophets portfolio.