National Australia Bank is facing an overhaul of its senior executive ranks in the next 18 months following the announcement on Tuesday that chief financial officer Gary Lennon will depart the company in October.
Lennon’s retirement from the bank after seven years as the top bean-counter means he will beat NAB’s 65 year old chief executive Ross McEwan to the door.
NAB’s current head of strategy and innovation Nathan Goonan will take over as group CFO in July.
Goonan, who previously worked as an investment banker at Lazard and Goldman Sachs, will occupy an expanded role as CFO by retaining some of his strategy functions.
McEwan, who turns 66 in July, is reported to be planning a departure some time next year even though he intimated to colleagues in December a determination to address strategic challenges facing the bank.
The prospect of McEwan’s departure has put many institutional shareholders on edge, given the premium that he has built into NAB’s share price since he took the reins at a parlous moment for the company in December 2019.
There’s a convention in large Australian companies for boards to plan the timing of a CEO’s departure not to coincide with the exit of a CFO.
Several fund managers told Banking Day yesterday that Lennon’s departure in October was a strong signal that McEwan was likely to stick around until the end of 2024.
While NAB’s New Zealand-born chief was recruited on a rolling contract with no set term, he is required to give the board 26 weeks' notice of his intention to vacate the role.
Depending on the terms of his contract, McEwan potentially risks losing eligibility for short term and long term performance bonuses if he leaves the bank before the middle of 2024.
A lot might hang on whether McEwan’s contract stipulates his retirement age as 65 (the convention in New Zealand) or 67, which applies to Australian workers born after 1 July 1957.
If the Australian standard applies, he risks losing unvested variable rewards and long term bonuses by resigning before he turns 67 in July next year.
If he retires as a bank executive after turning 67 next year he would likely remain eligible for such residual incentive payments that could run into many millions of dollars.
However, if the New Zealand retirement standard applies to his contract, McEwan could leave the bank at any time of his choosing without forfeiting his unvested incentive payments.
Details of McEwan’s contract were first disclosed on page 66 of NAB’s 2020 annual report and reiterated in the latest accounts.
Although no clear successor to McEwan is apparent in his senior management team, most analysts and fund managers consulted by Banking Day view the current head of business banking, Andrew Irvine as a slight frontrunner.
The other most cited internal candidate is the executive head of digital and data, Angela Mentis.
Mentis’ career trajectory is akin to several previous chief executives, such as Cameron Clyne and Andrew Thorburn, who led the Bank of New Zealand subsidiary before taking the top group role.
Mentis was CEO of the Kiwi arm for four years until the end of 2021.