Call it the great Ken Hayne market rally of February 5, 2019 — the ASX was up 1.4% or 85 points in 30 minutes in one of its strongest openings for months. The surge was led by the big four banks and some wealth managers who investors reckon have escaped any real penalties from the royal commission, despite all the headlines and obvious examples of breaches of law and poor practice.
In early trading, Commonwealth Bank shares rose 4% (it reports its December half results tomorrow and the hand wringing and mea culpas will be heard all across Australia), and ANZ’s 5%. Westpac rose nearly 6%, AMP surged 8% and IOOF 10%. Both IOOF and AMP are considered to be the two companies most likely to face serious legal trouble down the track, but investors rejoiced there were no immediate threats from yesterday’s final report despite the litany of misconduct identified.
NAB’s shares rose less — around 3.5% — reflecting that the bank’s CEO Andrew Thorburn and chair Ken Henry were singled out for criticism by Hayne over their lack of interest in addressing the bank’s fee-for-no-service scandal. In a statement issued by the NAB board early Tuesday morning, both men rejected the Hayne’s claim that he is “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 …”.
“[That] does not reflect who I am or how I am leading, nor the change that is occurring inside our bank,” Thorburn insisted. “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.”
Henry responded to the suggestion that he refused to accept criticism by refusing to accept that criticism:
In his final report, Commissioner Hayne said I seemed unwilling to accept criticism … 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.
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 Henry and Thorburn and their continuing presence in the bank’s boardroom will allow shareholders to maintain the rage.
But from investors’ point of view, it seems they believe the worst is over and the major financial institutions will be able to return to the business of making money, albeit in a slightly more restricted regulatory environment.