Day 502: 'Utterly disgraceful'
Counting the days since the banking royal commission was established.
Good afternoon, and welcome to day 502.
Today in summary: Macquarie Group has slipped through the royal commission unscathed; AMP was spared a second strike but is facing a A$100 million class-action lawsuit; and NAB is facing legal action for bad business loans at Britain’s Clydesdale Bank, which it used to own.
-- Alex
@AlexESampson
Current banker panic level: 😎😫😟
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Macquarie’s half-year results revealed less royal commission damage than other banks. Macquarie Group today reported a record A$2.99 billion profit and raised its final dividend, compared with its peers ANZ and NAB, which this week posted losses and cut dividends as attempts to remediate customers for poor behaviour weighed heavily.
It was revealed Macquarie Group chief executive Shemara Wikramanayake was paid more than A$17 million last year — more than the combined pay of the chief executives of the big four banks. Macquarie’s eight senior executives were paid more than A$27,000 a day. This comes as executive remuneration has been put under a microscope by regulators and corporate governance experts after the royal commission proved pay was a key cause of unethical behaviour.
AFR | The Australian | SMH
AMP may have avoided a second strike on its remuneration report at its AGM yesterday, but the embattled bank is now facing a new class-action lawsuit worth more than A$100 million. Law firm Slater & Gordon has filed the case, which alleges superannuation savers were ripped off by excessive fees and bad investment returns, and says it has identified more than 8,000 potential class members.
The legal firm believes as many as “tens of thousands” of AMP customers have been affected. The financial services group has already been hit by multiple shareholder class actions and battles with ASIC over misleading behaviour since the royal commission was launched.
So far this year NAB has lost its CEO and chair, cut its dividend for the first time in eight years and revealed earnings losses as it attempts to reinvent itself following the royal commission. Now it seems the bank’s poor behaviour extended overseas, with NAB facing new legal action for bad business loans at Britain’s Clydesdale Bank, which it used to own.
The loans date as far back as 18 years with 150 companies joining a class action alleging they were deceived when they took business loans from the bank. The company managing the group claim said Clydesdale’s conduct toward its customers had been “utterly disgraceful”.
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Today’s burn prize: Allan Gray fund manager Simon Mawhinney
“It is going to be a difficult business to turn around and I don’t think yesterday’s announcements change anything.”
Mawhinney told the AFR financial services companies like AMP had a bigger task ahead of themselves than other institutions to recover customer trust following the royal commission.
The Commentariat
The Australian’s senior banking reporter Joyce Moullakis discusses the balancing act facing banks on executive pay. She argues NAB and AMP “have a lot of work to do” to create executive pay structures for their executives that will appease regulators and keep investors at bay.
“Pay frameworks, which the royal commission showed are explicitly a driver of behaviour, will again be a hot-button issue in the latter half of 2019.”
SMH’s Elizabeth Knight says AMP’s “shiny new” image isn’t fooling anyone. She argues changes to management, a new chief executive and better corporate governance will unlikely be enough to win back customers who have lost trust in the brand.
“So tarnished is AMP’s brand reputation from the banking royal commission revelations that rebuilding confidence will be a multi-year process and Thursday’s update demonstrated clearly that it could take some time before the funds flow even stabilises.”
Andrew Thorburn’s NAB is in pretty good shape, Terry McCrann writes in the Herald Sun. McCrann argues ousted CEO Thorburn “owns” the NAB result, saying the bank was in remarkably good shape after a trying period.
“The result reflected the complex interplay and impacts of a series of major traumas — the like of which, apart from the existential shocks of the early 1990s, our banks have never really faced before.”
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