Commonwealth Bank Appoints Narev Chief Executive Officer, Replacing Norris
Commonwealth Bank of Australia (CBA), the nation’s largest lender, named Ian Narev to succeed Chief Executive Officer Ralph Norris as competition intensifies in the weakest mortgage market in three decades.
Narev, a former McKinsey & Co. partner who joined Commonwealth Bank in May 2007, heads its business and private banking unit, the Sydney-based lender said in an e-mailed statement today. The 44-year-old will take over on Dec. 1.
Norris, 62, steered the bank through the worst financial crisis since the Great Depression without bailouts and expanded the mortgage business by acquiring BankWest in 2008. A New Zealand citizen like Norris and a child actor who appeared in a 1979 television miniseries, Narev needs to fend off competition even as home loans grow at their slowest pace since 1977.
“The ongoing challenge for CBA is to maintain or pick up their market share,” said Paul Xiradis, who manages about $12 billion in assets including Commonwealth Bank stock as chief of Ausbil Dexia Ltd. in Sydney. “In the past they’ve done that by focusing on their customer satisfaction and cross selling -- that’s going to be the ongoing challenge for him.”
The bank’s shares rose 1.6 percent to A$50.52 in Sydney. The stock is this year’s second-best performer among the nation’s four-pillar banks, so named for laws that prevent them from buying each other. The shares have climbed about 33 percent since Norris took charge in September 2005.
Narev’s rise to the top follows roles overseeing Commonwealth Bank’s corporate strategy, including its A$2.1 billion ($2.3 billion) acquisition of Perth-based Bankwest from the troubled U.K. bank HBOS Plc at the height of the credit crisis in 2008.
In January 2009, he moved to his current position as head of the business and private banking unit, which includes its retail brokerage and margin lending operations and employs about 4,000 of Commonwealth Bank’s 45,000 staff.
Narev “has restructured and revitalized business and private banking, which has delivered double-digit revenue and profit growth with significant efficiency gains,” Commonwealth Bank Chairman David Turner said in today’s statement. “He is a proven and inclusive leader.”
Turner said on a call with reporters that “it’s important not to read” into the appointment as any change in strategy.
Commonwealth Bank’s unaudited cash earnings in the three months ended March 31 was about A$1.7 billion, the bank said May 11. That’s 13 percent more than the A$1.5 billion reported a year earlier. Full-year earnings are to be released Aug. 10.
Narev’s appointment is “a bold choice” and a surprise since the bank’s retail business chief, Ross McEwan, was the “favored internal candidate,” according to Citigroup Inc. analysts led by Craig Williams in Melbourne. “But his track record is thus far solid,” they wrote in a note today.
Challenges facing the bank include economic disruption, new business models powered by technology and “greater regulatory and public scrutiny,” Narev told reporters today. “I expect one way or another, these trends will be with us for some time,” he said.
Norris became a lightning rod for public anger after the bank led rivals in November by boosting its mortgage rate by more than the central bank’s benchmark increase in a move that Treasurer Wayne Swan condemned as a “cynical cash grab.”
“I was always aware of the fact that that was going to be controversial, but in the end I was in this position to make the tough decisions,” Norris told reporters today.
Moody’s Investors Service in May downgraded the bank, along with Westpac Banking Corp. (WBC), National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd., one level to Aa2, citing their reliance on wholesale funding markets.
The banks, which account for about 87 percent of the nation’s home loans, have since reduced the amount of money they borrow from global debt markets, partly because of a surge in deposits as consumers save at the highest rate in two decades and demand for credit wanes.
Loans to home buyers in May rose 6.2 percent from a year earlier, the slowest annual pace since 1977, when the central bank began recording the data. Property prices slid 1.7 percent in the first quarter, the most since 2008. Australia has the developed world’s highest benchmark interest rate.
Australia’s four largest banks will also see earnings growth curbed by proposed capital buffer rules aimed at preventing another global credit squeeze, Citigroup analysts said this week. Citigroup cut the forecast for earnings per share at the lenders by 2 percent to 4 percent over the next four years as a result of the proposed changes and higher funding costs.
Narev joined McKinsey in New York in 1998, and worked in its financial institutions group until 2002, before transferring to McKinsey’s Auckland and Sydney offices. He became a global partner in 2003 and headed McKinsey’s New Zealand office from 2005 until his departure in 2007.
As a child, Narev had a role in a 13-part historical miniseries, “Children of Fire Mountain,” which was set in 1900 and portrayed the conflict between the Maori and white settlers. Filmed in 1979, the series was shown on the BBC in 1980, according to Wikipedia. His role in the series was confirmed by Commonwealth Bank spokesman Steve Batten.
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