SYDNEY (Reuters) - The chief executive and chairman of Australia’s fourth-largest bank NAB are quitting, the biggest scalps following a major inquiry that leveled blistering criticism at the country’s financial sector for widespread misconduct.
After a year-long inquiry that exposed a culture of greed in the financial sector, the Royal Commission this week issued a final report that singled out the National Australia Bank (NAB) chiefs for their apparent unwillingness to accept responsibility for past wrongs at the lender.
The departures of NAB CEO Andrew Thorburn and Chairman Ken Henry show the slow-burn pressure the inquiry has had on the country’s biggest companies even as some consumer groups complained the Royal Commission went too soft.
Thorburn had ruffled shareholders by planning two months of leave on either side of the Royal Commission’s delivery of its final report, which was hotly anticipated as a watershed moment for the country’s banking industry.
After the report went public on Monday, Thorburn canceled the rest of his leave. While he released a statement disagreeing with the report’s criticism of his attitude, he told local media on Tuesday that he was not sure he would last the week.
“I acknowledge that the bank has sustained damage as a result of its past practices and comments in the Royal Commission’s final report about them,” Thorburn said in a statement issued by NAB on Thursday.
“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, however I recognize there is a desire for change.”
Thorburn, who joined as NAB’s head of retail banking in 2005 and became CEO in August 2014, will leave on Feb. 28. Henry, a former central banker and adviser to the prime minister, will stay on as chairman until the lender hires a new CEO.
NAB said board member Phil Chronican, a former executive at larger rival Westpac Banking Corp, will be interim CEO.
Analysts see NAB’s chief customer officer Mike Baird, a former premier of New South Wales state, as a likely successor.
Thorburn and Henry join the CEO and chairwoman of the country’s biggest financial planner, AMP Ltd, who quit before the commission ended over criticism of the firm’s handling of charging customers fees without providing a service.
The NAB bosses were also questioned about “fees for no service” during the Royal Commission.
Thorburn and Henry have been specifically called out for their intransigence in the final report issued by the retired judge who ran the inquiry, Kenneth Hayne.
“Having heard from both the CEO, Mr Thorburn, and the Chair, Dr Henry, I am not as confident as I would wish to be that the lessons of the past have been learned,” Hayne wrote.
“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.”
The NAB chiefs faced shareholder anger late last year when investors voted a record 88.1 percent against NAB’s executive bonuses, versus the required 25 percent threshold.
The inquiry has recommended that 24 misconduct cases from across the sector be referred for possible prosecution without giving details on the companies. Analysts expect companies that charged fees for no service to be included.
“Until now the Royal Commission recommendations had looked disproportionately small compared to the drama and the exposes and the condemnations of the hearings,” said Allan Fels, former chairman of the Australian Competition and Consumer Commission.
“But this starts to show ... the commission is making a difference,” Fels added, referring to the departures at NAB.
NAB also reported a tough first quarter on Thursday.
It brought forward the release of its profit announcement, initially scheduled for Friday, to show a 3 percent drop in cash earnings for the three months to December amid rising competition to sell mortgages and higher borrowing costs.
Expenses in the period fell 3 percent but core equity capital, a closely watched measure of the bank’s spare cash, slid to 10 percent, below a regulatory target of 10.5 percent.
Reporting by Byron Kaye and Paulina Duran in SYDNEY, Ambar Warrick in BENGALURU; Editing by Stephen Coates and Himani Sarkar