At the Annual General Meeting on Friday, Mr Henry was asked by a shareholder whether the board had ever discussed the ‘four pillars’ policy (that the four major banks cannot merge with each other or be taken over by a foreign bank), to which the chairman commented: “I don’t recall any discussion in the NAB board in the five years that I’ve been on it, about the four pillars policy; about the fact that there is bi-partisan support for the proposition that no one of the four major banks can acquire/merge one of the other four major banks. Nor the protections from been taken over by foreigners. This is not one of the issues that we have discussed.
“But I guess I would say this (and this is more a personal comment and its guided more by my past then by the job I’m undertaking now): Don’t be under any illusions. It is possible for one of the big four banks to fail … and then we would have three pillars.”
While Mr Henry said he “certainly [doesn’t] expect it”, and noted that it would “be a catastrophe if it were to happen”, he added: “There seems to be a view that it’s absolutely impossible for any one of the four [major banks] to fail (and I read this stuff all the time), and therefore management can be sloppy. Therefore, shareholders don’t worry about what's happening to the business. Therefore, executives take all sorts of crazy risks, knowing that a government would bail them out. That's certainly not how we think.
“We don’t think that we're going to be, any of us, protected if we do crazy things that would put our future at jeopardy in the absence of something like the four pillars or in the absence of protection from foreign acquisition.”
However, the chairman said the management team and the NAB board are dedicated to ensuring the bank will not be at risk.
Delivering the frank speech, Mr Henry went on to say that NAB “had made mistakes”.
“This board is very aware that this bank has made some very huge mistakes … We've seen our mission as turning this bank around.”
According to the chairman, the bank has the ambition of becoming “number one again”, however he was quick to clarify that this would be measured by performance rather than market capitalisation.
He explained: “We want to be number one in performance. We measure performance according to things like: the return on equity to you our shareholders; the way in which we are providing for customers what it is what customers want…
“When we say that we want to be number one, these are the metrics by which we will judge our success. Does that mean that one day NAB will once again have the biggest balance sheet of the four banks in Australia? Well, it might, it might not. But if it doesn’t, we will still feel (providing we are performing against the metrics of excellence that we have set for ourselves), that we have done a good job and that we can proudly stand up and say that we are number one.”
He noted that in the last 12 months, the bank has gone some way in improving its positioning, after seeing its return on equity raise from fourth to second (of the big four banks).
When it comes to financial advice scandals, Mr Henry said NAB takes “no comfort” from the knowledge that all four banks have suffered reputational damage from the issue.
“We're doing what we can internally through our emphasis on values and improving the culture of the organisation to ensure that NAB does not have any scandals, even if the rest of the industry continues to have scandals – not that I want to see that either,” Mr Henry said.
“But I want to ensure that NAB does not have future scandals that damage the reputation of this business.”
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.