January 28, 2018 / 10:42 PM / in 20 days

Australia's CBA surprises with internal CEO hire amid money-laundering scandal

SYDNEY (Reuters) - Commonwealth Bank of Australia handed the CEO mantle to its retail banking boss Matt Comyn, in a move the lender hopes will bring stability as it battles a money-laundering scandal and braces for a powerful industry-wide inquiry into misconduct.

The appointment, however, surprised several experts who had expected the country’s biggest lender to avoid naming someone from within its ranks on concerns the person may be seen as tainted by the scandal.

Comyn replaces Ian Narev, who has led CBA since 2011 and announced his retirement last year amid mounting calls for his resignation, following allegations in a federal lawsuit that CBA oversaw tens of thousands of breaches of anti-money laundering rules.

“The importance of maintaining momentum at the moment should not be underestimated” and Comyn’s familiarity with the A$137 billion ($111 billion) company makes him the best candidate for the role, CBA Chairman Catherine Livingstone said.

“There are aspects of the bank and its culture that we absolutely want to preserve and nurture and Matt is very well aware of those, as he is equally aware of the issues which have led to our current reputational issues,” she said.

CBA has been accused of allowing suspicious transactions pass through its retail deposit machines, and for failing to report attempts to wire money by individuals convicted of terror-related offences.

It is fighting the lawsuit being pursued by Australia’s financial crime fighting agency, AUSTRAC. Analysts estimate the case could result in several billions in fines.

Comyn’s challenges, as he starts on the top job on April 9, will be to help restore the lender’s reputation amid the court case and a looming government inquiry into the sector through a year-long Royal Commission - which has the power to compel witnesses and recommend criminal charges.

SKEPTICAL ABOUT INTERNAL CANDIDATE

Some analysts, however, were skeptical about naming an internal candidate CEO at such a time.

“All indications were it would be an external appointment, given the AUSTRAC issues are ongoing ... all internal candidates are effectively tarnished by the same brush,” said Omkar Joshi, a portfolio manager at Regal Funds Management.

“It is a good appointment, don’t get me wrong. He has a good track record and in normal circumstances, I think he would have been given that job anyway.”

Regal Funds owns CBA shares.

Livingstone declined to comment on whether Comyn had been cleared by regulators of any accountability or wrong-doing related to AUSTRAC’s claims before the appointment, but said the board had considered he was “fit and proper” in line with corporate rules.

Comyn, who has led the bank’s retail unit since August 2012 after joining the bank in 1999 as a graduate, will receive A$2.2 million ($1.78 million) in annual fixed pay as CEO, lesser than Narev’s A$2.65 million base pay as CBA tries to improve perceptions ahead of the inquiry.

Growth at Australia’s “Big Four” banks, among the world’s most valuable, have been hit by tighter credit conditions and competition from technology giants such as Apple Inc, Amazon and Facebook as they introduce mobile payment and banking services.

CBA has also suffered setbacks in recent years over allegations it used outdated medical information to justify refusing life insurance payouts or gave poor financial advice.

CBA shares have shed 17 percent from their 2015 peak.

The stock closed up 0.6 percent at A$79.19 on Monday, in line with gains of 0.3 percent in the broader market.

Reporting by Paulina Duran and Byron Kaye; Editing by Peter Cooney, Jonathan Barrett and Himani Sarkar

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