More than $20 billion was added to the value of listed financials – lead by the big four banks yesterday after investors concluded the outcome from the Hayne banking and finance royal commission would not damage their business models our futures.
The ASX 200 Financials index closed 4.5% higher, its best day since March 2009.
Westpac shares rose 7.4% to $26.70, Commonwealth Bank climbed 4.7% to $73.60, ANZ lifted 6.5% to $26.86 and NAB closed 3.9% higher at $24.97, despite Commissioner Kenneth Hayne singling out the bank by criticising its senior leadership.
The two wealth managers considered to be most at risk – AMP and IOOF rose nearly 10% and 8% respectively – despite them being the subject of referrals to ASIC and other regulators (along with the NAB, CBA and ANZ, but not Westpac)
The wider market rose 1.9% to 6005.9, the highest the ASX 200 has been since October 2018.
The biggest one-day gain was insurance company Steadfast Group, up 11.5%.
Mortgage brokers were punished. Australian Finance Group ended the day 29% lower at 90 cents and Mortgage Choice shares lost 25% at 78.5 cents.
The CBA releases its interim earnings later this morning.
Shares in Freedom insurance Group were suspended at the company’s request before trading yesterday (the shares rose Monday to 0.2 of a cent from 0.1 on Friday) while the company assesses its future. It has little or no prospects of continuing because it has abandoned its cold calling business model.
So with that strong market reply from investors yesterday it’s no wonder that CEO Andrew Thorburn and Chairman Ken Henry yesterday rejected criticism of them and their attitudes in the appearances at the royal commission from Commissioner, Ken Jayne in his final report. In a statement issued to the ASX this morning, both men gave a polite finger to Mr. Hayne’s comments.
The statement was issued early Tuesday morning. The bank’s board met this morning and the statement, issued in the bank’s name, indicates both have the support of the board. In the statement, both men rejected Commissioner’s Hayne’s comments and claimed to have been, well misunderstood. There was no mention of resignation of considering their positions in the light of Commissioner Hayne’s trenchant criticisms of both men:
“Having heard from both the CEO, Mr. Thorburn, and the chair, Dr. Henry, I am not as confident as I would wish to be that the lessons of the past have been learned,” Commissioner Hayne said in his final report, released late Monday. “More particularly, I was not persuaded that NAB is willing to accept the necessary responsibility for deciding, for itself, what is the right thing to do, and then having its staff act accordingly,” he said.
Commissioner Hayne Dr. Henry singled out Dr. Henry for especially sharp comment following his evidence at the royal commission which was largely regarded as dismissive. “I thought it telling that Dr. Henry seemed unwilling to accept any criticism of how the board had dealt with some issues,” Commissioner Hayne.
He also pointed to Mr. Thorburn’s reluctance to accept the bank’s active role in charging fees for no service.“I thought it telling that Mr. Thorburn treated all issues of fees for no service as nothing more than carelessness combined with system deficiencies when the total amount to be repaid by NAB and NULIS on this account is likely to be more than $100 million,” he said.
In the statement from the NAB on Tuesday morning, Mr. Thorburn said: “ As the CEO, this is very hard to read, and does not reflect who I am or how I am leading, nor the change that is occurring inside our bank. While we have made mistakes, I believe there is a lot of evidence that we are making sustainable and serious change to once again regain the trust of all our customers.
“I am proud to be a banker; it has always been a profession of service. I am proud to be CEO of NAB, and am more determined than ever to lead NAB with even greater urgency and intensity and show through our ongoing actions that we do what we say….I will lead this personally and visibly, and alongside NAB’s 33,000 employees who share my determination to be better for customers.”
Dr. Henry said: “In his final report, Commissioner Hayne said I seemed unwilling to accept criticism of how the Board had dealt with some of the issues raised by the Commission. I am disappointed that the Commissioner formed this view. I know that it is not so. The Board and I have reflected deeply on those and other issues and, as I have said previously, we take them very seriously.”
“We have said we are not prepared to accept good intentions where urgency, consistency and discipline is required. The Board has led a deep examination of our culture, governance and accountability. We are the only bank to publicly release our assessment, which clearly outlines 26 areas we are focussing on to be a better bank.”
NAB’s shareholders delivered the biggest ever ‘no’ vote on the bank’s remuneration at the annual meeting last last year. The 88% ‘no’ vote was a record.
Even at this early stage, it is clear the bank will face significant opposition at this year’s AGM and the Commissioner’s comments about Messrs Henry and Thorburn and their continuing presence in the bank’s boardroom will allow shareholders to maintain the rage. NAB will have to arrange succession plans for the two – former NSW premier Mike Baird looms as the most logical candidate for the CEO’s role; a possible new chairman remains unclear.
Despite their rejection of Mr. Hayne’s comments, both men will have to go sometime this year to allow the NAB to get on with its life post the royal commission without facing headwinds from their continuing roles at the company.
