While in Sydney, McEwan is also expected to spend time with NAB’s customer complaints team and its UBank division. On Wednesday, all of the bank’s employees will get the chance to ask McEwan questions via the NAB Workplaces digital communications platform, before he joins other recent NAB recruits in the standard induction sessions run for all new hires.
He will then end the week back in Melbourne.
It’s a week that is representative of McEwan’s schedule for his first few months in the job, which will see him hold a series of meetings with customers, employees, regulators and shareholders. He will officially front the latter for the first time at NAB’s annual general meeting in Sydney on December 18.
‘Simplify’ is the message
In an Australian banking sector where the main job of a chief executive right now can be summed up as “don’t stuff up”, the message from McEwan in these early meetings will likely fit the times.
During his time running the strife-torn British giant Royal Bank of Scotland and in his media appearances when he was appointed to NAB in July, McEwan has presented a consistent message – banks must become simpler, and focus on doing the basics better than their rivals.
Executing on a simple idea like this isn’t easy, of course. As Westpac’s AUSTRAC mess has shown us, these are hideously complex organisations that have been far too prone to surprises in recent years. NAB, notably, has unresolved AUSTRAC issues of its own to deal with.
Westpac would love to have had someone on its board who could step up and step in as well as Chronican.
But McEwan, who is 62, is an experienced executive who has taken more than a few punches, particularly at RBS, which almost went under during the GFC and was only saved by a massive government bailout that saw the British taxpayer emerge as the owner of two-thirds of the bank.
This focus on doing the basics might well sound a like a motherhood statement – who can really argue with a sentiment like that – but it will provide a rallying point as McEwan seeks to engage customers and staff.
McEwan is also singing from the same hymn sheet of simplification – some might say commoditisation – as the rest of the Australian banking industry,
Arguably, McEwan’s predecessor Andrew Thorburn (whose demise in February has been largely forgotten in the drama at Westpac) acted faster and more directly on this than some of his peers in 2017.
Thorburn announced a three-year plan to invest $1.5 billion over that period, to cut about 6000 jobs, hire 2000 staff in specialist areas such as technology, reduce the number of products inside NAB by half and extract $1 billion in costs by the end of 2020.
Setting aside the remediation and fixes stemming from the royal commission – clearly no small thing to ignore – NAB has actually made pretty good progress.
Of the 6000 staff to be cut, 3713 had been removed by September 30, with 1240 of the specialists hired (with an unsurprising bias towards compliance). So far, $800 million of costs have been cut, the number of products in the business is down from 600 to 423 (on the way to 300 by the end of 2021) and revenue per business banker is rising.
Chronican a boon
Phil Chronican, who has officially moved from acting chief executive to the chairman’s offices in recent weeks, deserves kudos for keeping momentum in the transformation amid all the other shock waves roiling the banking sector at present.
Indeed, while it’s not very fashionable to praise bankers right now, it does seem like Chronican has done a pretty impressive job steadying the ship and generally keeping NAB out of major trouble since February.
Chronican’s ability to effectively take on the pressure of both the CEO and chairman roles for nine months has been impressive; Westpac would love to have had someone on its board who could step up and step in as well as Chronican has done at NAB.
The question that NAB investors will be looking for McEwan to answer is what does he do with the platform that Thorburn and then Chronican has built for him.
In his early days at RBS he made it clear that the bank had to make tough choices, and no doubt a similar message will be provided to NAB. But what do those choices look like?
Are there more staff that the bank can jettison, as technology plays a greater role in delivering basic services to customers?
Or can he replicate the strategy to slash branch numbers as RBS did? This has long been considered by banking analysts as the biggest pool of cost savings across the banking industry, and with 51 per cent of NAB’s simple consumer products now delivered by digital channels, there is a strong logic to shrinking the branch network.
But it is politically fraught and a time when banks are on the nose. How brave might McEwan be?
What about the ‘loyalty tax’?
There is a laundry list of other issues that McEwan will have to deal with in 2020.
No doubt he will need to reshape his executive team and there may be some writedowns too, as with most new CEOs.
A solution needs to be found for the MLC wealth business, which is being run by Geoff Lloyd; can McEwan help find a neat way to properly exit the business, or does he simply shut it as quickly as possible?
The banks face increasing capital requirements on both sides of the Tasman, with the Reserve Bank of New Zealand to detail its new requirements this week.
And of course, the market nervously awaits any AUSTRAC action against NAB.
One fascinating question is how McEwan handles the criticism of the banking sector over the “loyalty tax” that takes the form of the different prices paid for loans by new and existing customers of the big banks.
McEwan has been through this. In his first major speech as RBS chief executive, he drew a line in the sand, declaring that “if we have an offer it will be for all customers, new and old. Introductory offers are not fair.”
Could McEwan do something as gutsy at NAB, and set the bank apart from his peers? Evans and Partners analyst Matt Wilson believes the industry needs to get in front of regulation in this area if it doesn’t want to run into trouble from politicians and/or nimble competitors.
Such a move would, of course, shrink bank margins, profits and potentially dividends.
But unfortunately, investors need to get used to this – this is the new world of banking.
Indeed, for all the slashing that McEwan did at RBS, it’s worth noting that his successor, Alison Rose, used her first speech to staff last month to explain her plan to – you guessed it – simplify the bank, reportedly saying RBS will “need to make tough choices” and “continuing to reduce the bad costs across the bank … will be critical”.
It’s a familiar message that will get even more familiar in the months and year to come.