PEOPLE who criticise the big four banks for making too much profit are out of touch with financial reality, Commonwealth Bank CEO Ian Narev told a packed QUT Business Leaders Forum today.
Mr Narev, speaking at the sold-out event at in the Hilton, said criticism of bank profits did not take into account those who were benefiting from that profit.
“We are in an environment where there has been a lot of debate about `the banks’,” he said.
“The Banks are too x or The Banks are too y, or The Banks make too much profit.
“But an interesting thing happened to me when I delivered the second profit announcement after I took over (as CEO), I came home and my wife asked me `Are you a psychopath?’. And I said `No, why do you ask?’. She said `Well, I was just reading a blog about you that says anybody who says they are proud of that profit must be a psychopath’.
Business Leaders Forum, March 3, 2014, Commonwealth Bank CEO Ian Narev “That’s one golden rule of readership: Don’t read anything written about you, not even the good stuff because that can soon turn bad. We have among our shareholders 800,000 Australian households who own the Commonwealth Bank directly.
“Then there are millions more that own it through shareholding through pension funds. So of the current market capitalisation of $120 billion, Australian households directly hold $70 billion of that wealth. The average household’s stake is $70-$75,000, which is big money for them. The $1.83 paid in dividends put a total of $2.9 billion back in hands of shareholders.. .
“The people who ask `Do banks make too much money?’ are actually talking about the people who own the Commonwealth Bank, the people of the country we serve… Our view is that profits are a source of pride. People who say it doesn’t matter are distanced from the reason why a lot of people are relying on the Commonwealth Bank.”
He said that when the financial sector looked back on the past few years, they won’t necessarily remember the biggest impact being the Global Financial Crisis. Instead, it will be seen as the period in which technology completely transformed the business of finance.
He said the four major changes were:
Fast broadband and mobile broadband, allowing people faster and faster access to financial services
The service environment now relied on the device the customer used to access financial services
The amount of new Apps that were being downloaded on to that service device
The cost of gathering and storing data had fallen dramatically.
He said the bank recently completed a six-year project updating core computer operating systems, which has impacted every facet of the business.
“One million people have downloaded the Commonwealth Bank app and 40 per cent use it solely to interface with the bank,” he said, adding that service had to be above par because of the social media commentary those apps afforded.
He said the trick to leading such a large organisation was humility and not to make the “arrogant’’ mistake that present industry troubles were harder to surmount than any that had gone before.
“An organisation works 99 per cent better if you just stay out of the way,” he said.
“Every part of history had its own challenges. This is just our version of those challenges.
“The old philosophies of managing a business are now even more important than ever. It’s a matter of bridging the gap between the new and old.”
The next QUT Business Leaders Forum will be on May 23, where Telstra chairman Catherine Livingstone. Details: http://www.qut.edu.au/business/about/events/qut-business-leaders-forum