With current Commonwealth Bank of Australia (CBA) CEO Ian Narev
on the way out, the board is predicted to find a replacement through external channels.
This prediction comes from Morningstar analysts in an investor note released on Monday (28 August) which said that given the current string of cultural issues, CBA is likely to move away from recent practice and opt for a new CEO from outside of the bank.
The CEO succession process, which is expected to be finalised before mid-2018, will create “considerable uncertainty” for CBA, the analysts said, despite strong leadership needed now more than ever.
A recent announcement by the Australian Prudential Regulation Authority
(APRA) of an independent inquiry into the bank was a “good outcome,” analysts said.
“The regulator will ensure the inquiry is balanced, independent and transparent and in the interest of all stakeholders – customers, staff and shareholders. The inquiry will not be political and will focus on governance, culture and accountability.”
“Importantly, APRA will not be influenced by political and media hysterics.”
Morningstar’s analysts approved of CBA’s stance that it would fully cooperate with the investigation.
“We expect the eventual outcome and fallout of the inquiry to be a pivotal point in rebuilding the bank’s tarnished brand and reputation following several embarrassing and high-profile missteps.
“But, regulating culture and behaviour in an organisation with around 50,000 staff is easier said than done and it will be up to the board, new CEO and senior management to develop, nurture and reward appropriate staff behaviour.”
The analysts expect the timing of the new CEO to coincide with the completion of APRA’s prudential inquiry. While the required outcomes would recommend ways to solve any shortcomings found at the bank, a “temporary capital penalty” which imposed a requirement for higher regulatory capital was also a possibility, they said.
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