[SYDNEY] National Australia Bank Ltd shares fell after the chief executive officer and chairman both resigned, becoming the highest-profile casualties of a sweeping inquiry into misconduct in the country's financial industry.
Andrew Thorburn, 53, and chairman Ken Henry, 61, announced their departures late Thursday, just days after being the target of withering criticism in the Royal Commission's final report, which questioned whether they were capable of leading the lender's response to a string of scandals.
The stock declined as much as 1.2 per cent in early Sydney trading, and was down 13 cents to A$24.80 at 10.10am local time.
Mr Thorburn's replacement will have to restore customer trust in the lender and steer it through a tougher landscape of falling earnings, a sinking housing market and rising funding and compliance costs. They will also inherit Mr Thorburn's overhaul of the bank, including the elimination of 4,000 jobs and increased spending on technology and process-automation.
"The removal of the current CEO in the middle of a major transformation increases execution risk," Macquarie Group Ltd analysts said in a note.
In further fallout from the inquiry, National Australia said it will delay the planned IPO (initial public offering) of its MLC wealth management unit as fee income and commissions come under pressure.
"With management attention focused on shorter term issues, execution risk around the core business rises," Citigroup Inc analysts led by Brendan Sproules said in a note. Citi cut its share price target to A$29.50, but maintained a buy recommendation on the stock.
The yearlong inquiry uncovered a litany of wrongdoing across the industry, from charging dead people fees to advisers pushing customers into bad investments to meet bonus targets. National Australia staff accepted cash bribes to approve fraudulent mortgages and misled the regulator over a fees-for-no-service scandal.
"I acknowledge that the bank has sustained damage as a result of its past practices and comments in the Royal Commission's final report," said Mr Thorburn, who will leave on Feb 28. "I recognise there is a desire for change."
In his final report released on Monday, commissioner Kenneth Hayne berated Mr Thorburn and Mr Henry for their performance in the witness box and questioned whether National Australia is "willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do".
"Having heard from both, I am not as confident as I would wish to be that the lessons of the past have been learned," he wrote.
Mr Thorburn was the longest serving of Australia's big-four bank CEOs, having taken the top job in August 2014 after running the lender's New Zealand unit for six years.
Mr Henry has served as chairman since December 2015, having joined the bank's board in 2011. Before that, he was the nation's top finance bureaucrat, and was one of the main architects of the stimulus package that helped Australia dodge a recession during the global financial crisis.
Mr Hayne excoriated Mr Henry's testimony, saying he "seemed unwilling to accept any criticism of how the board had dealt with some issues".
Mr Henry, who will leave once a permanent CEO is appointed, said his departure will help lead to a renewal of the board.
"This is naturally a difficult decision but I believe the board should have the opportunity to appoint a new chair for the next period as NAB seeks to reset its culture," he said in the statement.