new nab shake-up raises some doubts

New NAB shake-up raises some doubts
Author: Stewart Oldfield / AFR
Date: 24/08/2004


National Australia Bank shareholders yesterday reacted with suspicion to news of the latest shake-up of the bank's management structure.

On Friday, NAB chief executive John Stewart said that he was creating a new management structure for the Australian operations to be overseen by former Citigroup executive Ahmed Fahour.

One institutional shareholder said the restructure created a new level of bureaucracy within the company and raised doubts about the long-term tenure of the senior executives in the bank who will be effectively be demoted as part of the restructure.

NAB shares closed 15c higher at $26.65 in a stronger market.

Mr Stewart told The Australian Financial Review last week the shake-up was aimed at improving product cross-sell across the bank, breaking down a perceived silo mentality.

"The silos are holding us back. This is not what John Stewart thinks should change, this is what our own people think should change," he said.

In a report titled A 10-year report card: The future is challenging, Citibank said NAB's profit returns and growth in earnings per share had underperformed for a decade.
"Arguably, bank management has squandered the competitive advantage generated from 1991 to 1993, when asset quality issues caused large losses at ANZ and Westpac," the broker said.

Meanwhile Deutsche Equities said that the UK bank-reporting season had revealed continuing pressure on net interest margins. Retail banks suffered an 8 basis point average decline and retail/wholesale banks suffered an 18 basis point decline.

"Don't forget NAB's UK margin issues - potential buyers won't," the broker said.

Last week, Mr Stewart said a decision on the future of NAB's four UK and Irish banks could be made before the release of the bank's full-year results in November.

In the strongest indication yet that NAB will maintain the bulk of its operations in the UK, Mr Stewart said NAB had adopted a "default" position in which it would look to repair its UK businesses.

"There is definitely no overwhelming case for us to sell the businesses. The default case is looking at repairing the businesses, but because we want to get it absolutely right we are doing all the work to make sure," he said.

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With the overnight drop in the Dow and more negative sentiment around, NAB could be a nice short today.

Yo