Commonwealth Bank of Australia (CBA) has elevated one of its New Zealand-born banking executives Ian Narev as its new chief executive, to replace compatriot Ralph Norris.
But 44 year-old Mr Narev will only be eligible to earn about half of Mr Norris’ $16.2 million pay packet when the current chief retires in November.
CBA on Friday announced the internal appointment of Mr Narev, who is currently the bank’s group executive for business and private Banking and joined the bank in 2007 from strategy consulting firm McKinsey & Co.
Mr Narev was head of the firm’s New Zealand office and became one of a number of New Zealanders appointed by Mr Norris to help him run CBA, including former ASB Bank marketing head and sovereign insurance boss Barbara Chapman.
She is now chief executive of ASB Bank, CBA’s New Zealand subsidiary.
“I am really looking forward to taking over Australia’s leading bank at a time of rapid change in the local and global economies,” Mr Narev said in a statement on Friday.
Mr Narev would continue to “focus on transforming the group to become Australia’s finest financial services organisation and continuing to move that aspiration selectively into Asia.”
Commonwealth Bank chairman David Turner described Mr Narev as “an extraordinary executive.”
“He has restructured and revitalised Business and Private Banking which has delivered double digit revenue and profit growth with significant efficiency gains,” Mr Turner said in a statement.
Mr Narev will only be eligible to earn less than half of Mr Norris’s pay packet, much of which is made up of long-term incentives.
His new contract provides for base pay of $2.5 million a year, and another $2.5 million in discretionary short-term incentive cash payments, half of which will be deferred for a year.
Mr Narev is also eligible to be paid another $2.5 million in long-term incentive payments if he achieves key performance targets set by CBA’s board.
By contrast, Mr Norris’s total pay package balloon by 75 per cent in 2009/10 to $16.2 million, mostly due to a tripling in share payments to $9.2 million.
These long-term incentives were paid at the board’s discretion, and accounted for 57 per cent of Mr Norris’ total remuneration and include awards for the 2008, 2009 and 2010 financial years.
CBA’s business and private banking division generates $1 billion in net profit after tax (NPAT), under a quarter of the bank’s $5.6 billion annual NPAT reported in 2009/10.
Prior to his current role, Mr Narev led the bank’s strategy group and led its acquisition of BankWest and the investment in Aussie Home Loans.
Mr Turner said Mr Norris had delivered the best returns to shareholders of all of the major banks for the last five years.
Mr Norris said his six years in the top job had delivered in above average returns to shareholders.
“The ongoing success of our business is a tribute to the disciplined approach we have taken,” he said.
By 1045 AEST CBA shares gained 68 cents, or 1.37 per cent, to $50.42. The other major banks did better, with National Australia Bank, Westpac and ANZ all rising two per cent or more.
