Barbara Chapman's challenge at ASB: To boost the bank's profitability or stick with slick marketing focus

By Gareth Vaughan

Newly ensconced ASB CEO Barbara Chapman faces the challenge of balancing her marketing, human resources and public relations background with lifting the bank's profitability closer to that of its main rivals.

A New Zealander, Chapman officially took the helm as ASB CEO and managing director yesterday returning from five years at ASB's parent the Commonwealth Bank of Australia (CBA). In Sydney Chapman has been a member of CBA’s executive committee and headed up the bank's human resources, sustainability, marketing and communications operations. In the previously 12 years at ASB she held marketing, human resources and retail banking roles, and also served as managing director of the bank's insurer, Sovereign.

During her previous time as ASB marketing head, Chapman oversaw the introduction of the highly successful Ira Goldstein television advertisement campaign. It was dumped last year after 11 years for the new 'Creating Futures' campaign.

David Tripe, Massey University senior lecturer in banking studies, says given her previous time at ASB Chapman should have greater knowledge and understanding of the New Zealand banking market than her counterparts David Hisco at ANZ and George Frazis at Westpac. BNZ CEO Andrew Thorburn has more experience in New Zealand than Hisco and Frazis.

"She (Chapman) will be by far and away the one best positioned to understand the New Zealand market," Tripe says. "All of them have some understanding of the New Zealand market, but she would have some judgment of her own whereas the others may be being guided by people from Sydney, Melbourne or Auckland who may have other agendas to push."

Hisco, an Australian, moved to Auckland from the ANZ Group's Melbourne headquarters last September to take the helm at ANZ from Jenny Fagg. He previously spent two years in New Zealand, as CEO of ANZ's subsidiary UDC Finance, from 1998 to 2000.

Thorburn, who graduated from Auckland University with a Bachelor of Commerce, had ten years at ASB and senior roles at CBA, St George and BNZ's parent National Australia Bank prior to becoming BNZ's CEO and managing director in October 2008. Frazis, an Australian and formerly group executive general manager at National Australia Bank, took over as Westpac CEO in April 2009.

ASB's marketing focus, - strength or weakness?

Tripe notes that ASB has always had a very strong marketing focus, which is viewed as a strength in some quarters and a weakness in others in that the bank hasn't always generated the returns it might. Ralph Norris, a former ASB CEO and now Chapman's boss as CBA CEO, did a very good job of expanding ASB, but not necessarily such a good job of making it hugely profitable, adds Tripe.

"Chapman's a reasonably capable person. She has has worked for organisations other than ASB/CBA so she will understand something about trying to make businesses profitable as well as popular," Tripe says.

The question is whether she wants to try and turn ASB into a more profitable bank or continue with its marketing and public relations focus.

"Sooner or later one would think you have to switch to making it more profitable."

 Chapman has a Bachelor of Commerce degree and a Diploma in Industrial Relations. She is an inductee of the NZ Marketing Hall of Fame, has chaired Oxfam New Zealand and the Equal Employment Opportunities Trust.

Her first public move as CEO was announcing a Christchurch support package - following the devastating February 22 earthquake - in Christchurch in a press conference with Prime Minister John Key last month. Trumpeted as a NZ$250 million investment programme, ASB says the package will cost it a "significant amount" of money. Tripe notes ASB's Christchurch announcement was an example of good public relations.

"Probably the other banks won't be doing anything very different but ASB certainly managed to do a good PR job on it."

Net interest margins lagging

ASB's profitability has generally lagged that of its big rivals - ANZ, BNZ and Westpac. The most recent net interest margins reported by the four show ASB's at 2%, BNZ and Westpac both at 2.16% and ANZ at 2.39%. At 79%, home mortgages, less lucrative than institutional and business banking, comprises a bigger slice of ASB's total loans than Westpac's 68%, ANZ's 57% and BNZ's 50%.

In a move that could help boost profitability, last November ASB revealed a push into the lucrative institutional banking market, dropping the use of the CBA name to operate under the ASB Institutional brand. The bank aims to double its share of the institutional market, which it estimates at between 5% and 10% depending on customer segments and products, within three to five years.

ANZ, the biggest player in the institutional space, said in its last annual results that at 37%, the biggest slice of its NZ$867 million annual net profit came from institutional banking, ahead of 33% from retail banking,

Chapman replaces Charles Pink as ASB CEO. He departed last November and was replaced as acting CEO by ASB retail head Ian Park.

Norris said in August 2010 he wanted to see ASB grow its business banking operations. See our article here.

This article was first published in our email for paid subscribers this morning. See here for more details and to subscribe.