The Commonwealth Bank of Australia (ASX: CBA) board announced this morning that long-serving CEO Ian Narev will 'retire by the end of the 2018 financial year, with the exact timing dependent on the outcome of an ongoing comprehensive internal and external search process'. Shares were up 0.7% to $81.03 at the time of writing.
Today's announcement comes not long the allegation of poor internal controls at Commbank that lead to AUSTRAC filing civil litigation against the company. Concerns that the company's ATM machines may have been used for money laundering has also created concerns for the bank's counterparties in Hong Kong and the USA.
The announcement seemingly reflects a change of heart from the board, which previously declared that Ian Narev retained their full support.
Narev has been CEO at Commonwealth bank since 2011, and was the Group's head of strategy since 2007. Under his tenure, profits grew from $7.09 billion in the 2012 annual report to $9.93 billion in 2017, both on statutory basis. This is approximately 7% growth per annum, and the share price is up 43% over the same time frame.
His impending resignation will create significant uncertainty for shareholders, who are as yet unsure who will replace him. New CEOs can often write down and exit existing businesses that were part of the former CEO's strategy. We saw this at Australia and New Zealand Banking Group (ASX: ANZ) when their new CEO decided to exit the group's Asian investments.
If a similar thing happens at Commbank, the bank's future business plans could look quite different than previously. For example, the troubled life insurance business might also find itself a candidate for 'retirement' or sale. There may also be changes to the corporate culture depending on who's hired to replace Narev, and whether or not it's someone from outside the company. This is something for shareholders to keep in mind, especially if you're concerned about the company's culture.
