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New National Australia Bank (NAB) chief executive Ross McEwan has brought in consultants from Bain & Company to help with a four-month strategic planning review as the bank’s new boss looks to steer NAB into steadier waters.
McEwan faces a big challenge at National Australia Bank. The Big Four bank is struggling to cope with a rapidly evolving regulatory environment, maintain profitability in an environment of record low rates and bad press following a retail banking scandal.
Still, many believe McEwan is the right man for the job, having previously successfully led the Royal Bank of Scotland to its biggest turnaround in history. RBS was so badly hit by the global financial crisis that it needed the UK government to save it from collapse in a £45 billion taxpayer-funded bailout a decade ago.
During his reign, McEwan restructured the bank’s toxic debt, scaled the organization to become more agile and, most importantly, put the customer at the center of services and products. “We need to be a smaller, simpler and smarter bank,” McEwan said during his first address to bank staff shortly after taking the top role.
While National Australia Bank is nowhere near the state that RBS was in, there are a number of similarities. First, NAB needs to trim much of its fat, particularly in its branch network. The bank has more than 700 branches, more than 120 more than rival ANZ, for example.
Second, when compared to the top performers, NAB has a relatively high number of managers and employees compared to others. Under previous chief executive Andrew Thorburn, NAB announced a cost-cutting initiative that would cut 6,000 jobs, however McEwan is now likely to increase the target. During his tenure at RBS, the bank’s workforce fell from 137,000 to 66,600.
Thorburn was sacked from his duties at the bank earlier this year following strong criticism from the Royal Commission into NAB’s charging practices for services it did not provide. The bank’s reluctance to correct customers over the scandal also led to the departure of NAB chairman Ken Henry.
In addition, NAB faces a number of regulatory risks. Its balance sheet is considered “too risky” and McEwan will seek to reduce risk-weighted assets. It will also focus on restructuring some major asset classes in a bid to boost return on equity – NAB currently has the lowest return on equity among its main Big Four competitors. ANZ, Commonwealth and Westpac.
Connect with Bain
As part of the strategy-setting process, McEwan hired a management consultant from a consulting firm will assist in “a three to four month review” with the engagement being led in-house, with Bain consultants providing strategic insights and supporting analysis.
Bain & Company works for many of the world’s largest banks, and the consultants are also expected to bring insights and benchmarks to the table and help McEwan and NAB management shape their agenda.
In related news, earlier this year the Commonwealth Bank hired US consultancy McKinsey & Company for a major cost-cutting transformation.
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