Stuart Grimshaw, new CEO of humm
Incoming Humm Group chief executive Stuart Grimshaw has a habit of accepting senior executive roles in somewhat challenging times.
In 2006 Commonwealth Bank’s business lending division was on its knees after bleeding customers and cash for almost a decade.
While most of CBA’s divisions at the time were already primed for an unrivalled run of sustained double-digit returns, the business banking arm was still going backwards.
CBA’s then CEO Ralph Norris decided to poach Grimshaw from the National Australia Bank and gave him a mandate to turn the division into a profit-spinner within three years.
It took Grimshaw less than two years to restore the business to growth and by the time he left CBA in 2011 the division was threatening NAB’s longstanding stranglehold of the high-margin SME lending market.
Grimshaw was later promoted to chief financial officer at CBA but in August 2011 was lured to Brisbane to take the executive reins of Bank of Queensland, which was then mired in a controversy over its links with the collapsed advice group, Storm Financial.
A few months after he left Sydney, BoQ’s share price plumbed to an 8-year low of A$6.20 as investors questioned whether his growth program was achievable.
Three years later the bank was pumping out a return on equity of more than 10 per cent and the share price more than doubled to above $13.50.
Grimshaw has a track record of success in lending businesses that has earned him a reputation as a turnaround specialist.
At 61, the New Zealand-born executive says he is ready to do it all again at Humm where he has been a board member since July last year.
“If Charlie Munger can keep making the right calls at Berkshire Hathaway, I see no reason why I can’t run a finance business at 61,” he told Banking Day on Tuesday.
“I’m pretty passionate in what I believe and what I do.
“I have a high work ethic and I am sometimes impatient but I believe in driving people to succeed and excel.”
The Humm business desperately needs a fillip to revive its performance after a bitter board feud last year over the merits of a planned merger with Latitude Financial sent the share price into tailspin from which it has not recovered.
The announcement of Grimshaw’s appointment on Tuesday occurred only an hour before the Australian Bureau of Statistics released data confirming that retail sales across Australia fell for the second quarter in a row at the end of March.
Humm’s consumer finance business, which includes its buy now pay later platform, is heavily exposed to demand variables in the retail sector.
While Humm issued an upbeat trading update last week that included a lift in its retail financing volumes, Grimshaw acknowledges he is taking the reins of the company at a challenging moment for the consumer business.
But he points out that almost half of the company’s profit last year came from commercial finance and leasing activities.
“There’s a distinction that needs to be made between where the noise is in the Humm business and the part where the profit is growing,” he said.
“If you look at our business, around 50 per cent of the profit growth is coming from the commercial and leasing area.
“Buy now, pay later is not actually a very big contributor to the group profit at the moment.
”So, our business is not completely tied to retail conditions.”
Grimshaw sees many opportunities to expand Humm’s credit card business in coming years and said the company was monitoring developments in the white label corporate card market.
There is plenty of uncertainty in the white label market as Macquarie’s deals with Myer and Woolworths unravel and speculation that David Jones might have to abandon its partnership with Latitude.
NAB, the new owner of Citi’s white label business, is probably unable to strike deals with new partners before it completes a platform integration some time in 2025.
“We’re watching with a lot of interest,” Grimshaw said.
“Usually where there’s volatility and change opportunities follow.
“We like the white label cards business – we’re closely aligned with Flight Centre.
“I do see the opportunity for us, but it’s also a matter of capital allocation and returns.
“We need to strike a balance between the return we need to make, which might be different to what a prospective large corporate partner might be prepared to accept.”
Grimshaw also said he believed that partnerships were an effective way to build scale in credit cards.
Since joining the Humm board last year, Grimshaw said he had been giving a lot of thought to how credit cards were priced in Australia.
While risk-based pricing was now a key factor underpinning differentiated interest rates of borrowers in the home loan market, risk-driven pricing had yet to make an impact on credit cards.
“I believe there is value in the cards market that hasn’t been effectively leveraged,” he said.
“Credit card pricing in Australia is still pretty much a flat fee.
“That’s something I want to look at.”