By Gareth Vaughan
ANZ New Zealand's public humiliation of David Hisco, its CEO of almost nine years, is extraordinary.
Despite delivering in spades for ANZ NZ's shareholder for almost a decade, Monday's announcement from the bank and subsequent press conference headed by ANZ NZ chairman John Key has likely ended Hisco's 39-year banking career.
Having announced Hisco was taking extended sick leave in late May, ANZ on Monday said he was leaving the bank by mutual agreement, after his expensing to the bank of chauffeur driven cars for personal use and wine storage dating back nine years came to light. In the media conference Key said this had cost ANZ tens of thousands of dollars, and was revealed in a review implemented by Shayne Elliott, CEO of ANZ NZ's Australian owner, the ANZ Banking Group.
Hisco moved from Australia to take the ANZ NZ helm in September 2010, succeeding Jenny Fagg who quit the bank to fight cancer. At the time ANZ NZ's banking operations were split between its ANZ and very popular National Bank brand, despite the National Bank having been purchased from Britain's Lloyds TSB as long ago as 2003. The two banks were also on separate IT systems and were headquartered in Wellington.
That all changed with the risky but highly successful 2012 culling of the National Bank brand and moving of ANZ and its customers on to the National Bank's IT platform. Hisco also moved ANZ's HQ to Auckland, where he aggressively took on ASB, the former Auckland Savings Bank. In October 2012 a combative Hisco told me ASB was "an Australian bank like us" with "no territorial rights over Auckland."
The highly successful ANZ-National Bank merger, in the face of rivals' unfulfilled expectations that it would enable them to pick off disgruntled National Bank customers, allowed Hisco to boast in ANZ NZ's recent half-year financial results that; "Since 2010 we have maintained our leading market share with no change to our cost base."
ANZ NZ, under Hisco's leadership, has certainly done a sterling job for its shareholder. Net profit after tax under Hisco's tenure totalled $13.438 billion up till March 31 this year. September 2018 net profit weighed in at $1.986 billion, way up from $867 million in the September 2010 year. Dividends paid during Hisco's tenure totalled $13.521 billion, albeit some of this was offset by share issues to its parent.
Indeed ANZ NZ has been a star performer within the ANZ Group over recent years, with several members of Hisco's executive team including Craig Sims, Fred Ohlsson, Graham Turley, David Green and ex-UDC Finance CEO Tessa Price promoted to group roles. Hisco himself has held group executive roles for Asia and the Pacific. As Hisco departs ANZ NZ has 31% of the NZ mortgage market, 33.8% of the household deposits market, 26.5% of the credit card market, and 23.3% of the KiwiSaver market.
Upon Monday's news of Hisco's departure The Australian Financial Review was quick to say it heralded a "brutal new age of transparency" in Australian banking following last year's Royal Commission. Led by its chairman David Gonski and Elliott, the ANZ Banking Group "has very deliberately called out board concern about the characterisation of certain transactions following an internal review of personal expenses," the AFR suggested.
Whilst it's true that conduct and culture at banks is in focus on both sides of the Tasman as never before, the Financial Markets Authority and Reserve Bank having also reviewed it in NZ, this is primarily about banks not screwing their customers. Who are the ANZ customers harmed by Hisco's alleged indiscretions?
Thus it's hard not to wonder if there's more to Hisco's departure than publicly claimed by ANZ. Whilst undoubtedly a bad look, Hisco's alleged conduct is hardly the crime of the century. Especially not for a CEO who must have met his shareholder's financial expectations over almost a decade, and who has worked for ANZ for 39 years.
If Hisco's use of chauffeur driven cars and storing of wine at ANZ's expense were the only factors behind what we're told was a mutually agreed departure, then why wasn't some agreement reached that didn't require him to be publicly thrown under the bus?
A few tens of thousands of dollars is not a material sum for ANZ or Hisco. To put this sum in context on Monday Key said Hisco was receiving a payout of about $2 million but giving up $6.4 million of equity. Key also said Hisco believed he had the authority to use the cars and store his wine at ANZ's expense, and ANZ NZ's board accepts that. Thus surely his pay could've been docked so ANZ was reimbursed. Couldn't ANZ have met its conduct and culture expectations without publicly humiliating a long serving, successful and loyal executive?
ANZ's revelations, but vagueness, on Hisco's health issues has also left questions unanswered. Now, having been hung out to dry publicly by ANZ, it's hard to see the 55-year-old Hisco getting another senior executive role at a major company, should he want one.
Thus although Key says Hisco's departure was by mutual consent, it sounds like he was sacked.
Key says there's nothing in Hisco's severance deal with ANZ that prevents him from speaking out about his departure from the bank. It will be fascinating to see whether he does so.
Hisco's tenure as ANZ NZ CEO was certainly blotted recently with news the bank was being censured by the Reserve Bank, which also revoked ANZ NZ’s accreditation to model its own capital requirements for operational risk, citing a persistent failure in controls and the director attestation process at the country’s biggest bank that dates back five years. The attestation failure is a big deal, as detailed here. However in Monday's press conference Key blamed a junior staffer for the events leading to the Reserve Bank censure.
As detailed by interest.co.nz, the Reserve Bank is also separately making ANZ NZ increase its risk weighted assets by more than $10 billion after reviewing its capital adequacy on farm lending and residential mortgage lending. This move comes with ANZ NZ having for years carried less capital against these loans than rivals ASB, BNZ and Westpac who also use the Internal Ratings Based bank capital approach. There is a feeling that some chickens are coming home to roost on the bank capital front for ANZ NZ thanks to a more proactive Reserve Bank. Combined, the two capital-related run-ins with the Reserve Bank mean ANZ NZ's minimum regulatory capital requirement rises by more than $1 billion.
Nine years is a long tenure for the CEO of a major entity such as ANZ NZ. And perhaps after a long run and with major changes like the Reserve Bank capital proposals, open banking and greater conduct and culture expectations, it is time for Hisco to move on. But the scale of his public humiliation doesn't fit the crime he's said to have committed. It will thus be fascinating to see if more emerges on the reasons for, and timing of, his departure.
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