Saturday, March 25, 2006

Paul McIntyre: Kiwis fly the flag at bank

New Zealand's long-term management grip on Australia's biggest banker, the Commonwealth Bank of Australia (CBA), firmed on Thursday when former ASB and Air New Zealand boss Ralph Norris carved up his senior management ranks.

The shake-up has resulted in former New Zealand hockey player Stuart Grimshaw emerging as the most likely successor to Norris whenever he decides to quit.

The 44-year-old, who started his banking career with the ANZ in 1983, a year before representing New Zealand in hockey at the Los Angeles Olympics, was one of two internal candidates in the running to take the chief executive's gig at the CBA before Norris got the nod six months ago.

The other internal frontrunner, Mike Katz, was effectively shunted by Norris on Thursday, although no one is officially saying that. Rather, Katz is leaving to pursue other interests.

But the investment community is convinced that Grimshaw is earmarked for the top job. There is one proviso, however.

Grimshaw must revive CBA's giant but chronically under-performing premium business services division before he can hang out with David Kirk, CEO of publisher Fairfax, at a Sydney sports bar and talk shop about playing sport for their country and telling a bunch of cantankerous Australians what to do.

Grimshaw now has control of about a third of CBA's banking income from operations which include the bank's premium retail, corporate and institutional banking divisions.

What's going for Grimshaw in this role is that he has been there before when he was sent to Glasgow by the National Australia Bank in 2000 to head up its Clydesdale and Yorkshire Bank units.

It was there that Grimshaw flagged his intentions to aggressively target high-net-worth individuals. And Kirk will be pleased that Grimshaw likes sporting analogies, using one in a newspaper interview when he first started in the UK about his hockey-related injuries.

"My thumb was broken in 10 places when I started one of my roles in banking," he told the Scotsman. "I was the most highly qualified guy in the place but I couldn't even sign a letter for weeks."

Grimshaw's hockey days may now be over but his competitiveness obviously remains to have survived the bank's notorious culture of tension in the senior ranks. The investment community is only too aware of the in-house bickering which has permeated top CBA management for years, a reputation which Norris sought to eradicate by telling his top team to bury the backstabbing.

This week, he went further by reshuffling the entire team and seeing off the guy who under previous CEO David Murray was heir apparent - Mike Katz. Katz was the second highest paid executive at the CBA, pocketing a $2.78 million package last year. But he won't be in any rush to find a new job - he's sitting on close to $5 million in CBA options.

One of the surprises for analysts in the Norris management shake-up this week was the lack of new blood, which many expected to come from his old New Zealand stomping ground at the CBA-owned ASB. Perhaps he didn't need to with a Kiwi ally in Grimshaw.

Still, the hard yards are ahead of both men. Norris got board approval for the changes following a two-day love-in last week in the wine growing region of the Hunter Valley. He also took CBA's board through his strategic blueprint for the bank, which will be unveiled next week to investors. It will cover four key areas: improving the performance of business banking; customer service; technology spending and operational excellence.

Norris stated the obvious this week in outlining the different approach he is taking at the CBA to what was required at Air New Zealand.

"We don't have a broken business model," he said on Thursday.

"We have basically a good business and it's about making a good business better."

And if all goes according to plan, Grimshaw could be well on his way to the top. There's a few banking on that one.

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