NAB chief Cicutto quits, clearing path for UK boss to save image

AAP General News (Australia)
02-02-2004
NAB chief Cicutto quits, clearing path for UK boss to save image

By Byron Kaye

SYDNEY, Feb 2 AAP - National Australia Bank (NAB) chief executive Frank Cicutto has
quit amid the $360 million currency trading scandal, clearing the way for UK boss John
Stewart to revive the bank's ailing reputation.

Mr Cicutto, an employee of Australia's biggest bank for 37 years, said a week ago he
planned to complete a three-year extension to his contract, signed last October.

No reason was given for his change of mind.

"I regret the decision was necessary but I believe it is in the best interests of the
bank," Mr Cicutto said in a statement.

Mr Cicutto has not held a press conference on the currency trading furore since it
surfaced on January 13.

He will collect $3.27 million on his way out, including a payment in lieu of six months
notice, and forgo $1.293 million worth of shares.

The 53-year-old Italian immigrant's future - and credibility - had been in serious
doubt since the bank revealed it suspended four currency options dealers over unauthorised
trades dating back to October.

The bank has said it expects $360 million in pre-tax losses from the trades, and promised
to publish findings from a full-scale independent investigation into its risk controls
later this month.

Investors sent the bank's shares as much as two per cent higher to be up 46 cents at
$31.02 by midday today.

More than $200 million worth of NAB shares were pumped through the market, representing
about one-fifth of all trades by dollar value.

"Cicutto going changes everything," JP Morgan banking analyst Brian Johnson said.

"I'd be very surprised if it was to stop there."

Investors would also be heartened by comments from NAB chairman Charles Allen that
the bank was now seeking directors with financial services experience, he said.

The bank had faced widespread criticism for having too few directors - and no independent
directors - with direct banking experience.

"The market's obviously applauding the fact that someone's taken a high profile fall,"

Macquarie Equities private client adviser David Halliday said.

"The market was basically baying for blood at some sort of senior level of the bank."

Both commended the bank's sudden shift to a risk adverse strategy, when it sold stakes
in St George Bank Ltd, AMP Ltd and AMP offshoot HHG Plc last week, ending its Australian
growth plans.

Others have suggested the independent investigation, by PriceWaterhouseCoopers (PwC),
could show Mr Cicutto was more closely connected to the scandal than first thought, given
his position on the bank's risk committee.

The Australian Shareholders Association backed the leadership change, but stepped up
its call for more information from the bank.

"It would seem, after Frank saying that he wanted to stay on, that he was pushed,"

ASA director Cliff Caldwell said.

"It would seem that things are more serious than we thought, or maybe the board felt
that Frank Cicutto's work in actually investigating the problems was defective.

"Maybe Frank's culpability is greater than we thought. We need more input from the
bank. We need greater understanding."

Mr Caldwell described Mr Cicutto's termination payment as "reasonable" given the size
of the company and the length of Mr Cicutto's employment there.

Mr Cicutto had presided over several high profile corporate mishaps since he stepped
up to the top job five years ago.

Most costly was the $4 billion writedown on United States mortgage business HomeSide in 2000/01.

Last year, he led the bank through an ambitious plan to buy 15 per cent of troubled
fund manager AMP. It walked away with less than five per cent.

Market participants were optimistic about the promotion of Scottish-born John Stewart,
the former deputy chief executive of Britain's third biggest bank Barclays, hired by NAB
just six months ago.

In particular, they said his experience in the UK banking industry would help revitalise
its lacklustre European operation.

"I think John Stewart actually seems more committed to it than perhaps (another) CEO
might have been," Mr Johnson said.

"He's got a good track record of turning businesses around. Market likes him. I think
it will be well received."

AAP bk/eb

KEYWORD: NAB LEAD

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