April 3 (Bloomberg) -- National Australia Bank Ltd., the country’s largest lender by assets, said Chief Executive Officer Cameron Clyne will retire in August and be replaced by Andrew Thorburn, the head of its New Zealand unit.
Clyne, 46, is leaving to spend more time with his young family after the role he assumed in January 2009 took a “personal toll,” the Melbourne-based lender said in a statement to the stock exchange.
The father of two has boosted NAB’s Australian mortgage business, shrunk its ailing U.K. unit and shut its investment banking division, having inherited the top job months after the bank reported losses of as much as A$830 million ($767 million) on credit-market investments. Thorburn, 48, still faces the challenge of exiting the U.K. business, which is reducing the group’s return on equity, and must brace for increased competition in a home loan market growing at its fastest pace since September 2011.
“Cameron was a strong CEO in a challenging period for NAB and I’m disappointed that he is going and that the bank will have a new CEO and CFO pretty much at the same time,” Mark Nathan, managing partner at Sydney-based Arnhem Investment Management, which controls about A$3.8 billion, said by phone. “There’s still work to be done at NAB with the big challenge being its U.K. operations.”
Clyne’s departure is the latest senior executive change at the bank. Craig Drummond, a former head of Australian operations at Bank of America’s Merrill Lynch unit, was named chief financial officer in November; Gavin Slater began leading the retail banking unit in April 2013 while Andrew Hagger took over its wealth management unit at the same time.
Return on Equity
NAB’s return on equity, a measure of how well the firm reinvests earnings, was 14.5 percent at the end of September, lower than its competitors, and its net interest margin, or the profitability of its lending operations, also lagged at 2.02 percent, according to filings.
The stock, which was down 0.6 percent at 2:45 p.m. in Sydney, has risen about 70 percent under Clyne’s leadership, trailing a more than doubling of the benchmark S&P/ASX 200 Banks index. NAB is the second worst performer this year among Australia’s four biggest banks, rising 1.5 percent, compared with a 6.6 percent gain for Westpac Banking Corp., a 3.1 percent rise for Australia & New Zealand Banking Group Ltd. and a 0.9 percent drop for Commonwealth Bank of Australia.
Clyne, a former management consultant, embraced a conservative approach when he took over as CEO in the depths of the global financial crisis.
“We are at our best when we are boring,” the 6-foot-6 (1.98 meters) former rugby player said in an interview in April last year.
Shares have been weighed down by NAB’s U.K. operations, where mounting bad debts in 2012 triggered the first drop in full-year earnings that year since 2009. The U.K.’s foundering economy torpedoed Clyne’s plans to sell the business or expand through acquisitions, leading him to transfer real estate loans from the U.K. to the group balance sheet and shrink the unit by cutting about 1,400 jobs.
“I would continue to pursue the strategy that Cameron has been following, which is to reduce the drag on our earnings and on our reputation,” Thorburn said in a telephone interview.
NAB’s share of Australia’s mortgage market has risen to 15.3 percent as of Aug. 31, up 2.5 percentage points from four-years earlier, trailing Commonwealth Bank and Westpac, according to filings.
“Cameron took over as CEO during the global financial crisis and developed an effective strategy to steer the bank through a challenging period,” NAB Chairman Michael Chaney said in the statement. “Cameron has built strong leadership across the organization, a stronger balance sheet, improved the bank’s culture, enhanced its reputation and dealt with a number of legacy issues.”
Before being appointed CEO of Bank of New Zealand in 2008, Thorburn was executive general manager of retail banking at NAB for three years and has more than 27 years of industry experience, according to the statement. His replacement at BNZ will be announced in due course, NAB said.
The unit’s cash earnings increased to NZ$788 million ($676 million) last year from NZ$557 million in 2008 and deposits grew to NZ$38 billion from NZ$24 billion, BNZ said in a statement on its website.
While Clyne’s retirement is a surprise “it appears to be a rational change at the right time in the normal course of business,” said Angus Gluskie, managing director at White Funds Management in Sydney who oversees about $550 million. “The timing is convenient with Clyne appearing personally ready to step aside and Clyne’s push on restoring NAB’s domestic position and some stabilization of the U.K. having been achieved.”
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