Executive Interview - Simon Narroway - National Australia Bank
(4 March 2003 - Australia) - Simon Narroway is the recently appointed head of Transactional Solutions, Corporate & Institutional Banking at the National Australia Bank.
Previously with Westpac, he joined the NAB three months ago with a clear mandate to rebuild the bank's transaction banking offering.
Here, in the first of ACB's new Banker Profile series, he talks with East & Partners Executive Editor Lachlan Colquhoun.
The market perceives that you have a rebuild and regeneration task ahead of you. Is this how you see it?
That's precisely the point. The National has slipped in this area over the years and I've come in from one of the market leaders - Westpac - where I was general manager of their transactional services side and I've joined the National with a very clear mandate to build their business back to market leadership.
What is the National doing that you think can be improved?
There's a number of obvious areas that I'm addressing. The sales management process and sales staff generally. There's a lot of emphasis on service, customer service which we have in place already but not so much on sales staff. So I've been recruiting some of the best sales staff I can find from around the market. There's also probably not been enough investment in the supporting infrastructure - some of the IT supporting capabilities, which transcribe to customer responsive products. So they are on the right track but the product range is tired I think, so we are making some investments to bring that up to speed.
What sorts of investments are you making?
We are currently rolling out an upgrade of our proprietary National Online PC banking system. It's a 32 bit upgrade. Based on my understanding of what the other banks have out there and also my knowledge from sales staff who have come in from other banks - and I have staff from every other major bank in the market who have joined in recent weeks - we believe this upgrade will make our product as good as anything else out there.
Would it be fair to say that in the past the National has shed accounts, without too much concern?
I don't think so. What we probably have not done well enough is to look at the overall relationships. We have many examples where we have quite extensive debt relationships with customers and we probably haven't leveraged that well enough into the transactional business. I'm not aware of any strategy where we deliberately went to customers and said 'thankyou, goodbye.' In fact I see a great opportunity because we have a core of transactional customers but we also have many other relationships, especially on the debt side, where we just simply have not cross sold a transactional suite of products and that's probably my main priority.
Any specific strategies to acquire new account business?
I have built up a reasonably sized sales team in the last few weeks. I've only been in the bank for three months and so far I've made about fifteen hires from all of my major domestic competitors as well as some international banks active in this space such as Citibank and JP Morgan Chase. And I reckon these people are amongst the best in sales in the market and they have a very clear mandate to chase after new customers - new to the bank completely as well as deepening relationships with existing debt customers. These new hires have come, in many cases, from banks with quite large market positions. The challenge of being part of the journey, in going from where we are today to what we hope is market leadership, is very enticing for them - that's why they are coming across. Most of them are coming across on unchanged financial packages. It's the challenge.
How would you describe the value proposition you are trying to build up?
I've been in banking a fairly long time, looking after all sorts of businesses over the years, and if we aspire to being the core banking relationship of our target customers the three pillars to that are debt relationships including credit extension and generally, using our credit capacity and our balance sheet. The second pillar is a very strong capability in risk management products. The third pillar is transaction banking and its transformation into what is becoming known as working capital services. In the debt area my perception is that we are as big as anyone, we have a strong franchise in that area, both on and off balance sheet. In the risk management area we have absolutely the leading position in the market place in a whole range of interest rate, currency, commodity and other risk products. In the transactional banking area it is fair to say we need to improve our position. So to establish a whole of bank relationship we have to lift our game in the transactional banking area and very much leverage our existing relationships in the debt and risk management area.
Where do you see the National in this transition to this working capital solutions concept? Is this something that you embrace as well?
Absolutely. The label transactional is becoming, I think, anachronistic. Working capital solutions in many ways encapsulates to me what is transactional now. It includes all the short term processing of payments and receivables, account structuring and the liquidity management coming out of that but also includes value-add solutions around short term working capital finance, receivables management, payables financing, and beyond that into B2B applications to facilitate online customer trading, both domestic and cross border. The movement to electronic invoicing, for example. The payments leg falls off the back of that quite naturally, but its no longer the main game. It is almost a natural consequence of leading in with solutions around optimising working capital for corporate treasurers.
And where would you see the National in its progression along the road towards that?
Early days. We certainly have the capabilities in house. They haven't been harnessed and focussed in any coordinated way hitherto. That's now happening. And I now have specialist staff looking at working capital financing solutions, the B2B opportunities and all supporting structures around that. There's a bit of IT infrastructure required, particularly internet web development because, while that is currently not the preferred channel of delivery, our surveys and external research show that corporate treasurers are slowly moving towards the web for the provision of certain products and services, mostly in the financial markets areas but ultimately - if you look at the experience offshore - the web will probably replace the proprietary software that banks have currently and will be the preferred channel of delivery for a whole bunch of services.
What sort of differentiation do you see for the NAB in the marketplace? What will make clients decide to switch bank and go with you once you have completed this re-build?
I think we are one of the few banks in the marketplace that can offer a whole of bank relationship. For example the foreign banks in this market, whilst they have quite robust transactional banking solutions, their debt capacity in Australia is minimal. I think they have been and always will be niche players. It's a volume game and we have scale. This push into working capital services is happening across the bank and there's a sister team to mine in our middle market, what we call Business Financial Services, which covers several hundred thousand customers ranging from very small SME's up to quite large corporates and they are putting in place quite a large team to rejuvenate their transactional push as well. So this is a whole of bank push, with strong support from the board and from the CEO and we are going back to stake (what we think) is our rightful place, which is number one or number two in this area.
Have you set a time frame on that?
Aspirationally, I would like to edge towards market leadership inside two to three years. But tenders these days are few and far between. A tender cycle typically is five to six years but many companies now don't go to tender at all so we have to go into companies with existing bank relationships with our competitors and through value add solutions entice them away - bits of their business first of all. It's now quite usual for many customers to have more than one transactional banking relationship, and the surveys from East & Partners show this quite clearly.
Yes, our last survey showed that a large number of mid-corporates had been approached to change banks over the last six months. Are you people making some of those approaches?
We have a pretty high calling activity happening, both mid-market and top end. And I have to say that our pipeline of prospective business has gone from being very thin when I first joined to quite fat. And some wins will come through. So initially we'll pick up secondary transactional banking business, selling solutions to the customers around optimising short term working capital in areas where we think we are very strong. Feedback from staff in areas such as card acquiring, where we believe we are best in market, is very good. So we will play to our strengths and leverage certain areas and see what happens.
Where do you see the growth coming? Do you see the commercial sector, of companies turning over between A$20-100 million, as a major opportunity?
My sister team, which looks after that area, believes so. We have a very strong lending position in that particular segment and a relatively weak transaction banking position. Over the years there's probably been an over-emphasis on our debt lending capabilities and as I said we are looking to leverage that. For most of these clients we know a lot about their debt relationships and the obvious next step is to cross-sell those debt relationships into transactional relationships.
You've been in the job three months. How are you finding it culturally? Any barriers or impediments to achieving your goals?
I've been very pleasantly surprised. There's a very strong value set to this organisation. Most large companies now have clearly articulated values. The difference here is that this organisation goes to great lengths to live those values. I've had nothing but support here because people know it was drifting along before I came and change is necessary.
So you are enjoying life under Ian Scholes, the head of National's wholesale banking activities, then?
He is an excellent leader. He's the principal reason why I joined the National. He's not prepared to accept the status quo.
Here, in the first of ACB's new Banker Profile series, he talks with East & Partners Executive Editor Lachlan Colquhoun.
The market perceives that you have a rebuild and regeneration task ahead of you. Is this how you see it?
That's precisely the point. The National has slipped in this area over the years and I've come in from one of the market leaders - Westpac - where I was general manager of their transactional services side and I've joined the National with a very clear mandate to build their business back to market leadership.
What is the National doing that you think can be improved?
There's a number of obvious areas that I'm addressing. The sales management process and sales staff generally. There's a lot of emphasis on service, customer service which we have in place already but not so much on sales staff. So I've been recruiting some of the best sales staff I can find from around the market. There's also probably not been enough investment in the supporting infrastructure - some of the IT supporting capabilities, which transcribe to customer responsive products. So they are on the right track but the product range is tired I think, so we are making some investments to bring that up to speed.
What sorts of investments are you making?
We are currently rolling out an upgrade of our proprietary National Online PC banking system. It's a 32 bit upgrade. Based on my understanding of what the other banks have out there and also my knowledge from sales staff who have come in from other banks - and I have staff from every other major bank in the market who have joined in recent weeks - we believe this upgrade will make our product as good as anything else out there.
Would it be fair to say that in the past the National has shed accounts, without too much concern?
I don't think so. What we probably have not done well enough is to look at the overall relationships. We have many examples where we have quite extensive debt relationships with customers and we probably haven't leveraged that well enough into the transactional business. I'm not aware of any strategy where we deliberately went to customers and said 'thankyou, goodbye.' In fact I see a great opportunity because we have a core of transactional customers but we also have many other relationships, especially on the debt side, where we just simply have not cross sold a transactional suite of products and that's probably my main priority.
Any specific strategies to acquire new account business?
I have built up a reasonably sized sales team in the last few weeks. I've only been in the bank for three months and so far I've made about fifteen hires from all of my major domestic competitors as well as some international banks active in this space such as Citibank and JP Morgan Chase. And I reckon these people are amongst the best in sales in the market and they have a very clear mandate to chase after new customers - new to the bank completely as well as deepening relationships with existing debt customers. These new hires have come, in many cases, from banks with quite large market positions. The challenge of being part of the journey, in going from where we are today to what we hope is market leadership, is very enticing for them - that's why they are coming across. Most of them are coming across on unchanged financial packages. It's the challenge.
How would you describe the value proposition you are trying to build up?
I've been in banking a fairly long time, looking after all sorts of businesses over the years, and if we aspire to being the core banking relationship of our target customers the three pillars to that are debt relationships including credit extension and generally, using our credit capacity and our balance sheet. The second pillar is a very strong capability in risk management products. The third pillar is transaction banking and its transformation into what is becoming known as working capital services. In the debt area my perception is that we are as big as anyone, we have a strong franchise in that area, both on and off balance sheet. In the risk management area we have absolutely the leading position in the market place in a whole range of interest rate, currency, commodity and other risk products. In the transactional banking area it is fair to say we need to improve our position. So to establish a whole of bank relationship we have to lift our game in the transactional banking area and very much leverage our existing relationships in the debt and risk management area.
Where do you see the National in this transition to this working capital solutions concept? Is this something that you embrace as well?
Absolutely. The label transactional is becoming, I think, anachronistic. Working capital solutions in many ways encapsulates to me what is transactional now. It includes all the short term processing of payments and receivables, account structuring and the liquidity management coming out of that but also includes value-add solutions around short term working capital finance, receivables management, payables financing, and beyond that into B2B applications to facilitate online customer trading, both domestic and cross border. The movement to electronic invoicing, for example. The payments leg falls off the back of that quite naturally, but its no longer the main game. It is almost a natural consequence of leading in with solutions around optimising working capital for corporate treasurers.
And where would you see the National in its progression along the road towards that?
Early days. We certainly have the capabilities in house. They haven't been harnessed and focussed in any coordinated way hitherto. That's now happening. And I now have specialist staff looking at working capital financing solutions, the B2B opportunities and all supporting structures around that. There's a bit of IT infrastructure required, particularly internet web development because, while that is currently not the preferred channel of delivery, our surveys and external research show that corporate treasurers are slowly moving towards the web for the provision of certain products and services, mostly in the financial markets areas but ultimately - if you look at the experience offshore - the web will probably replace the proprietary software that banks have currently and will be the preferred channel of delivery for a whole bunch of services.
What sort of differentiation do you see for the NAB in the marketplace? What will make clients decide to switch bank and go with you once you have completed this re-build?
I think we are one of the few banks in the marketplace that can offer a whole of bank relationship. For example the foreign banks in this market, whilst they have quite robust transactional banking solutions, their debt capacity in Australia is minimal. I think they have been and always will be niche players. It's a volume game and we have scale. This push into working capital services is happening across the bank and there's a sister team to mine in our middle market, what we call Business Financial Services, which covers several hundred thousand customers ranging from very small SME's up to quite large corporates and they are putting in place quite a large team to rejuvenate their transactional push as well. So this is a whole of bank push, with strong support from the board and from the CEO and we are going back to stake (what we think) is our rightful place, which is number one or number two in this area.
Have you set a time frame on that?
Aspirationally, I would like to edge towards market leadership inside two to three years. But tenders these days are few and far between. A tender cycle typically is five to six years but many companies now don't go to tender at all so we have to go into companies with existing bank relationships with our competitors and through value add solutions entice them away - bits of their business first of all. It's now quite usual for many customers to have more than one transactional banking relationship, and the surveys from East & Partners show this quite clearly.
Yes, our last survey showed that a large number of mid-corporates had been approached to change banks over the last six months. Are you people making some of those approaches?
We have a pretty high calling activity happening, both mid-market and top end. And I have to say that our pipeline of prospective business has gone from being very thin when I first joined to quite fat. And some wins will come through. So initially we'll pick up secondary transactional banking business, selling solutions to the customers around optimising short term working capital in areas where we think we are very strong. Feedback from staff in areas such as card acquiring, where we believe we are best in market, is very good. So we will play to our strengths and leverage certain areas and see what happens.
Where do you see the growth coming? Do you see the commercial sector, of companies turning over between A$20-100 million, as a major opportunity?
My sister team, which looks after that area, believes so. We have a very strong lending position in that particular segment and a relatively weak transaction banking position. Over the years there's probably been an over-emphasis on our debt lending capabilities and as I said we are looking to leverage that. For most of these clients we know a lot about their debt relationships and the obvious next step is to cross-sell those debt relationships into transactional relationships.
You've been in the job three months. How are you finding it culturally? Any barriers or impediments to achieving your goals?
I've been very pleasantly surprised. There's a very strong value set to this organisation. Most large companies now have clearly articulated values. The difference here is that this organisation goes to great lengths to live those values. I've had nothing but support here because people know it was drifting along before I came and change is necessary.
So you are enjoying life under Ian Scholes, the head of National's wholesale banking activities, then?
He is an excellent leader. He's the principal reason why I joined the National. He's not prepared to accept the status quo.
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