The Australian banking cartel has long been a cynical machine and even when holding their AGMs on the last Friday before Christmas they manage to say some stupid things, as Barry Banker explains.
Pity the poor little bankers. The ANZ is only the 19th largest bank (by market capitalisation) competing in Australia. Why, this is a disgrace! This tiddler, this minnow of the money market should obviously be allowed to get bigger and swallow something bigger.
Aim up son, Crikey urges the ANZ chief John MacFarlane to try and takeover, say, Citigroup. That’s the biggest bank operating in Australia, by market capitalisation.
And, if that’s a bit daunting, lower your aim and take out HSBC, another biggie. Don’t shirk it John, aim up and have a go.
Of all the self-centred self justifying claptrap that an Australian banker has sprouted in recent years, this one is a contender for the prize. And it’s not even April 1. Read his amazing comments from Friday’s annual meeting here.
Why, it’s something Commonwealth Bank CEO David Murray might have argued in one of his more cerebral moments.
And, Johnnie m’lad if you knocked off one of the biggies, you’d undo the four pillars policy, earning the eternal praise and thanks from your peers at Westpac (Dr David Morgan), John Stewart at the NAB and of Big Dave at the CBA.
And lovely Gail Kelly at St George would be a very happy, and rich lady dragon!
Their options, shares and bonus packages would be worth mega bucks and they’d gladly chip in a mill or two to make sure your pay was up to world standard once you’d landed the giant grouper of banking. Self sacrifice I’d call it. Doing the right thing for his peers!
Being in the top 20 banks in this market means you’re very close to being in the top 20 banks around the world.
And it’s a bit of a strange statement by the affable Scot. In this market the Aussie banks, with their branch networks, market shares and deposit base and cost structures, are highly competitive, akin to something like an impregnable domestic cartel. They are far stronger than any of those giants from overseas.
You might notice Johnnie didn’t say that it was the 19th most profitable bank operating here and I don’t mean in terms of absolute size of profits. The correct measures are also its on return on assets, its earnings per share growth, reliability and quality of assets and earnings and the cost to income ratio.
By these measurements the ANZ, Westpac, St George, CBA and NAB are world class businesses, well able to take on any bank of any size in this market. Just as some of the giants from overseas are well placed in their main domestic markets to repel or fight invaders.
By Johnnie’s other comments, that the ANZ would step up investment in branches and staff is more of his newish mantra that gathering deposits and servicing the needs of customers, is the way forward for banks. Branch banking! How novel! A brand new idea, not!
American banks have gone back into branch banking as corporate banking waned and the US housing boom accelerated about three years ago.
Suddenly, ordinary customers are in. It’s something our banks have espoused as they slashed service levels and branch structure to make savings, only to realise they were cutting themselves adrift from the very group of customers who gave them steady, reliable fee and interest income.
Don’t tell McKinsey or the Boston Consulting group though of this breakthrough in bank thinking. They’ve already done their best to level the National Australia Bank by meeting every madcap restructuring idea from Don Argus in his latter years and Frank Cicutto more recently.
Both the ANZ and Westpac seem to understand that customers are important. Certainly St George has for years. The CBA says it does with the Which New Bank? revamp that’s all about $1.5 billion in new investment, but more importantly also about cutting up to 2500 staff.
The ANZ, Westpac and St George have seen strong interest in their shares, the CBA remains underwhelming for many investors while the NAB is a ‘recovery story and no one trusts the new management.
For a cleverly managed bank the chance is there to do what four pillars would do through diluting shareholding interest: drive one of the other rivals out of parts of the market, or at best force them to retreat or retrench.
Finally, a tip for 2005. Watch the CBA and its New Which Bank revamp. There’s a great deal of market unease with the Commonwealth and the worth of this revamp because of the sort of actions the ANZ and St George are taking in driving their retail business. Investing more without the massive dislocation that Dave Murray is imposing on his underperforming retail division.
CBA chairman John Schubert is not as strong a fan of Big Dave as was his predecessor, John Ralph. Cut from different cloth and from different times.
Of all the bank CEOs, Big Dave is the one under the pump! What odds he won’t see out 2006?