Day 370: 'Nobody likes bad news'
An introductory weekday newsletter from Schwartz Media. Counting the days since the banking royal commission was established.
Good afternoon and welcome to day 370.
Today in summary: all eyes shift to bonuses as banks seek to avoid a second strike; NAB can see better days on the horizon, ANZ is still talking up the headwinds; and IOOF seeks an “early” trial while its chairman and CEO remain on paid leave.
This is the last edition of The Inquisition for 2018. We’ll be back on deck with a new editor and more analysis from January 14. Thanks for following.
-- Charis
Current banker panic level: ✈️🏝😴
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NAB’s top bankers can kiss next year’s bonuses goodbye based on yesterday’s historic shareholder vote, the only question is, when will they return?
Shareholders punished NAB’s indecision on pay, but were less angry at ANZ which has outperformed its Melbourne rival and still paid some bonuses despite the annus horribilis.
It all came down to how it handled the crisis, says Australian Shareholders' Association proxy Geoff Read:
"Directors took a pay cut, all the bonuses have been reduced, they've set up fair and just compensation measures for aggrieved customers.
"Nobody likes the bad news that has come out of the banking royal commission but given that it has, the next question is how do you deal with a crisis. I think they've dealt with it in a pretty good way."
For NAB, the only appropriate bonus in the wake of this year’s scandals was zero, according to Australian Shareholders’ Association representative Dennis Shore.
"The buck has to stop somewhere.
"There is something fundamentally flawed when senior executives can be rewarded handsomely when there is negative TSR (total shareholder return)."
Likewise, Australian Council of Superannuation Investors chief executive Louise Davidson said NAB had misread the mood.
"Reducing short-term bonuses, rather than zeroing them, was a hollow gesture and failed to meet investor and community expectations about accountability."
Meanwhile, NAB chief Andrew Thorburn, perhaps buoyed by his imminent holiday escape, told yesterday’s AGM tightening credit policies stemming from the Hayne royal commission and leading to slower processing of loans “won’t stay like that”. He added that a slowdown and period of stability would likely benefit the market in the longer term and the bank is still:
“very much open for business.”
Over in Perth, ANZ chief Shayne Elliot was managing expectations a little better, telling shareholders falling house prices, stiff competition for loans, higher compliance costs, and a stall in borrowing by investors were hanging around.
“We don’t see these trends changing any time soon. Credit losses were the lowest in a generation and while there are no signs of it getting worse, it’s hard to imagine it improving any further."
Beleaguered wealth management group IOOF fronted court today for a case management hearing, where its lawyers asked for a three week hearing in June next year. APRA’s barrister thinks June is a “bit ambitious” and prefers August, but we won’t find out until March 19 when the case returns for further directions. In the mean time, IOOF’s chairman George Venardos and chief Chris Kelaher remain on paid leave while they fight the case.
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We’re not here to offer opinion, simply to cut through the noise, and help you make sense of the emerging policy and market trends you need to be across. We call it pure intel. You can read more about us here.