The National Australia Bank Ltd. (ASX: NAB) share price will face a stormy session tomorrow after its top two executives gave in to public pressure and announced their resignation after the market closed today.
The bank has also taken the opportunity to release its quarterly trading update, perhaps in hope that investors wouldn't be too perturbed by the change in leadership at the embattled bank, which is arguably facing the most amount of pressure from the Banking Royal Commission.
The bank's chief executive Andrew Thorburn and chairman Ken Henry have announced that they will be leaving the bank after the two were specifically criticised in the Banking Royal Commission's final report.
The NAB share price had rallied 1.3% to $24.93 but was lagging its peers the Commonwealth Bank of Australia (ASX: CBA) share price, Westpac Banking Corp (ASX: WBC) share price and Australian and New Zealand Banking Group (ASX: ANZ) share price.
Departure details
Mr Thorburn will leave the bank at the end of this month while Dr Henry will "retire" after a new permanent chief executive is found.
Current NAB director, Philip Chronican, who has been described as having extensive domestic banking experience, will serve as acting CEO.
Mr Thorburn's and Dr Henry's resignation shouldn't surprise anyone, particularly after they issued a defiant response to Commissioner Kenneth Hayne's report that examined illegal and unethical behaviour by the large financial institutions.
Their statements in this evening's ASX announcement regarding their departure still had hints of defiance that will not go down well with angry customers and shareholders.
Defiant to the end
"As CEO, I understand accountability. I have always sought to act in the best interests of the bank and customers and I know that I have always acted with integrity," said Mr Thorburn.
"However, I recognise there is a desire for change. As a result, I spoke with the Board and offered to step down as CEO, and they have accepted my offer."
Dr Henry also defended Mr Thorburn by describing him "an executive of the highest quality and integrity". This description stands in contrast to the inexcusable behaviour from the bank that was exposed during the Royal Commission.
Dr Henry did apologise for not meeting customer expectations and added "my decision [to resign] is not made in reaction to any specific event, but more broadly looking at the bank's needs in coming months and years".
Not sure if anyone will believe that.
Foolish takeaway
But NAB will be hoping that shareholders focus on its financial performance instead. The bank reported that cash earnings increased 2% over the 2H18 quarterly average to $1.7 billion but was 3% lower than 1Q18.
NAB said that revenue was broadly stable with good growth in housing and SME lending, while expenses also fell due to its transformation program.
That's not a bad outcome given the many headwinds buffeting NAB and the banking sector, including the weak residential property market.
However, NAB is my least preferred bank stock as I suspect it will lag the other big banks for a while yet.
