UPDATE 5-Australia’s NAB turns to RBS turnaround man Ross McEwan as CEO

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SYDNEY (Reuters) – National Australia Bank Ltd (NAB.AX) has hired the man credited with turning around Royal Bank of Scotland (RBS.L) as its new chief executive, as it moves on from the abrupt departure of its leaders this year in the fallout of a misconduct inquiry.

FILE PHOTO: The logo of National Australia Bank is displayed outside the firm’s headquarters in central Sydney, Australia, Aug.4, 2017. REUTERS/David Gray/File Photo

New Zealand national Ross McEwan, 62, is the outgoing CEO of Britain’s RBS and has also held senior roles at Commonwealth Bank of Australia (CBA.AX). He joins NAB as the No. 4 bank and its peers fight to win back customer trust after damaging findings at the Royal Commission inquiry into the financial sector.

Although the inquiry lambasted the whole industry for rampant fee-gouging and overly aggressive sales tactics, NAB was the worst hit of the so-called “Big Four” lenders, losing its CEO and chairman over accusations they had failed to accept responsibility for wrongdoing at the company.

“It’s going to be a tough job,” said banking analyst at Morningstar David Ellis. “He’s facing a very hostile environment and a soft economy.”

NAB shares were 2.2% higher on Friday, following the announcement, while the broader financial sector .AXFJ was up 1.2%.

The hire presents NAB shareholders with a fresh face – but with experience in the local market – to lead the company through a period of strategic and political rebuilding, in contrast to early speculation that the company had pegged an internal candidate for the job.

McEwan is also seen as an experienced banker who has led RBS through a period of complex change and has dealt with many of the issues currently facing the Australian banks, including an increasingly tough revenue environment.

He is not a stranger to criticism either. As he announced his exit from RBS, analysts raised questions over the timing of the departure, just months before Britain is scheduled to leave the European Union and with dark clouds looming over the British housing market.

In a call with journalists on Friday, McEwan said he was approached by NAB soon after he resigned from RBS.

He said it was important to “protect and accelerate” NAB’s transformation of its operations and culture into a better bank – a comment analysts read as a signaling restructuring beyond the bank’s current digitization project, which aims to save A$1 billion in costs and shed thousands of staff by 2020.

“Over the years we have had the occasional interactions with Mr McEwan as CEO of RBS. (During that time) RBS took multiple provisions in relation to restructuring and customer remediation,” Credit Suisse analysts told clients in a note.

“With this in mind we view the risk is that Mr McEwan rebases more than what the market expects and that the majority of the $1bn of cost saves from the current transformation program … are utilized in the next program with shareholders seeing very little immediate benefit.”

On Friday, McEwan said it was “a privilege to return to Australia and lead NAB at a crucial time for the bank, its customers, employees, shareholders and the broader community.”

McEwan quit RBS in April with a year’s notice and would start at NAB by April 2020, NAB said. Interim CEO Philip Chronican will then become its new chairman.

“NAB, for 20 years or so, has been underperforming,” said Morningstar’s Ellis. “He’s got a lot of work to do to bring NAB up to its peers”.

Reporting by Paulina Duran and Byron Kaye in Sydney; Additional reporting by Ambar Warrick in Bengaluru; Editing by G Crosse and Christopher Cushing

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