Bank's culture means caution

By PAM GRAHAM

Reports last month in Australia that Lloyds TSB was examining options for its subsidiary, the National Bank of New Zealand, prompted speculation on which Australian rival would pay up and work through New Zealand competition rules.

A bank would pay more for another bank because savings from combining two businesses and taking out a competitor outweigh gains other buyers would expect, merger advisers said.

But National Bank is not just a slice of New Zealand market share - worth between $5 billion and $6.1 billion to an acquirer, and less if sold to the public, according to Merrill Lynch.

It is a successful team built up over decades by Sir John Anderson.

The 57-year-old chief executive is more likely to be quoted on sports pages as a cricket administrator than in the business section. He does not give interviews to business reporters.

He has not sought a profile because he is comfortable with where he sits, says former Finance Minister Sir William Birch. "He can do without it."

Sir John has sat on most industry and many government bodies and is known to all parties. He does not lecture them publicly.

"He has got very firm views on what he believes in and that is partly why he has been successful as a banker," said Sir William. Sir John supported good fiscal and monetary policy but was more flexible than some of the Business Roundtable people, he said.

When chief executives of other foreign banks operating in New Zealand came and went, Sir John has been constant. When strategies elsewhere came and went as consultants varied, Sir John kept most things in-house.

When others moved head offices to the population base in Auckland, Sir John stayed in Wellington. "Why do I want to interfere with our business in Auckland?" he said to someone who asked once.

He has a reputation as a hands-off manager who, nevertheless, sets the culture of the bank. One story has it that a Lloyds executive who once suggested he spend more time on the bank ran into him shortly afterwards at a cricket match at Lord's.

The core of Sir John's team was at Southpac, the merchant bank established in the early 1970s that was an aggressive player in the 1980s through the mid-1990s.

Market folklore has it that its treasury department contributed as much as a third of the bank's profits and bought virtually all of the Government's benchmark maturity bonds more than once.

"They had a legendary reputation and took on a lot of risk," said MP John Key, who used to work for Bankers Trust. "They were notorious in my time for trying to squeeze the bond market."

Southpac's risk tolerance had declined enormously since the late 1990s but the bank had enjoyed a good reputation, thanks to fiercely loyal staff.

When it was merged with National Bank the Southpac team took over, a point that some say should be noted by anyone eyeing National Bank.

The National Bank sold its wholesale funds management business to AMP Henderson and has never had an equity business to complement debt products.

The retail bank is successful and strongly branded with Lloyds' thoroughbred black horse.

It bought Rural Bank in 1992 and Countrywide in 1998. It sponsors cricket, netball, the New Zealand Symphony Orchestra and the Cancer Society.

Lloyds bought National Bank outright in 1966 and allowed it to be run from Wellington from 1978.

National Bank, Lloyds and Deutsche Bank, which is reported to have been hired as an adviser, are making no comment publicly. There are no signs of active marketing.

Analysts say Commonwealth Bank, which owns ASB and ANZ, would benefit the most from a purchase but even it would have difficulty getting it through regulators. A tie-up with St George Bank was seen as a possibility, but not a perfect match, and HSBC has also been the subject of speculation.

Lloyds TSB will have a new chief executive this month. It has bought insurance and funds management businesses that ran into the same problems as AMP encountered in Britain when the FTSE was weak.

There has been speculation for years that Lloyds TSB will do something with its New Zealand business and nothing happened.

Holding on to it does not hurt. It reported a $503 million profit last year in the usual, one-paragraph press statement.