NAB [NAB] chief executive Frank Cicutto has resigned following the discovery of unauthorized foreign exchange trading leading to a total pre-tax loss of A$360 million. John Stewart, the head of NAB's UK operations has been appointed as the new chief executive. As a result, NAB may become more active in the British market - although its tarnished reputation could hinder its success.
On January 13, 2004, NAB announced that it had found unauthorized foreign currency options trading on its books. The problem started when foreign currency traders sought to hide losses incurred in their portfolio by exploiting loopholes in the NAB's internal systems that allowed them to log fictitious trades.
An initial total of A$185 million was identified as losses incurred by the traders. However, this was reviewed to a total pre-tax loss of A$360 million after revaluation of the trading book.
Since the scandal broke, NAB has ensured that all necessary measures have been taken to reassure its shareholders. The Australian Stock Exchange and relevant regulatory authorities were informed, and internal and external investigations were undertaken that resulted in the suspension of four traders. Furthermore, an independent investigation by PriceWaterhouseCoopers has been commissioned and the results will be made public.
However, it seems that even this has not been enough to satisfy concerned investors. Following the discovery, Frank Cicutto felt it necessary to resign in the best interests of the bank - a move supported by shareholders. NAB's shares rose 2% in the wake of the decision. Investors considered Mr Cicutto to be uninspired and sometimes indecisive in his management.
The new chief executive, John Stewart, is currently a director on the principal board and executive director of NAB's UK business. His wide experience and successful track record in international and retail banking, coupled with a thorough knowledge of the British banking industry, is likely to mean that NAB will be more active in the British market. However, even if the bank does choose to boost its low profile in the UK financial services sector, NAB's image has been severely damaged by the trading scandal, and Mr Stewart will have his work cut out to succeed.