“It can sit quite heavily,” says Westpac chief executive Catherine McGrath, on the responsibility of heading up a major bank.
Ultimately, “the buck stops” with the CEO when things go wrong, she says.
“It’s not just about lending and looking after money, it’s making sure that payments go through every time that we want them to.
“We all need money to move. It’s a critical part of society, and the responsibility [is] to make sure that something we all take for granted just works.”
McGrath, who grew up in the Bay of Plenty in the 1980s, returned to New Zealand in 2021 to take on the Westpac role, having risen to the upper executive ranks at UK giant Barclays.
As a banking CEO, she recognises that she earns a lot of money.
That’s no secret because her salary is published in Westpac’s annual report as a statutory requirement.
For the record, the latest NZ Herald CEO pay report has McGrath’s salary at about $2.4 million – in the middle of the pack for leading, large Kiwi companies.
New Zealand’s highest-paid CEO (John Cullity at Ebos) earned $7.2m.
“I recognise that I get paid a lot of money,” McGrath says. “I’m very lucky and have worked hard.
“It is deeply uncomfortable when what you earn is published,” she says. “It’s not just your immediate family, it’s everybody who will have a view and an opinion.”
But McGrath also accepts it is part of the job for big company bosses.
“It’s fair enough as well. It’s right that it’s transparent. So from my view, whilst I don’t like it, it comes ... with a territory.”
Banking is an industry that pays well, she says.
But other industries pay well, too. And it certainly wasn’t the money that drew her home.
She puts it diplomatically. But she would be earning more if she had stayed in the UK.
“Whilst we look at it from a New Zealand perspective and say it’s a lot of money, most CEOs who come from outside New Zealand to return home to bring their skills to New Zealand aren’t doing it for the money,” she says.
“They’re doing it for other reasons. The choice to come back to New Zealand was about family and actually wanting to be back.”
Money is important to an extent, she says.
“Women tend not to be that good at asking about money. It’s been a byproduct of saying, ‘Actually, I reckon I could do that job.’ And having the curiosity and ambition to say, ‘Could I make a real impact in doing that job?’
“That’s what drives me to make a positive impact in the jobs that I’m in.”
While McGrath certainly wasn’t poor growing up, there wasn’t a lot of spare money.
“I don’t remember money being discussed a lot, but I also don’t remember that there was much to spare,” she says.
Her dad was an accountant and her mum was a teacher.
“It was the days of chequebooks. Dad loved to understand where the money was going. My mother wasn’t that great at filling in the chequebook stub,” she says.
“There would be conversations on the weekend: can you remember what this one was for?”
She can recall hearing the adding machine going on a Sunday afternoon as her father worked out the cash inflows and outflows.
“There was some sort of subliminal cashflow management stuff that I remember, from when I was pretty young,” she says.
Banking was never on her radar as a child, though.
“I never grew up thinking that I was gonna be in banking,” she says.
“Once I got to university, I wanted to be a lawyer. I did a law and commerce degree.”
While she was a student, she spent one summer working as a clerk for a law firm, which was enough to convince her that law was not for her.
“I didn’t find that the most interesting thing I’d ever done, if I’m quite honest. So the next summer, I inadvertently ended up in a job at a bank and found it far more interesting,” she says.
“I was in the marketing department. I got to do some quite cool stuff.”
So a week after her last exam, McGrath joined the BNZ, where she worked until heading to the UK.
In the UK, McGrath’s career took off.
She worked for Clydesdale Bank and Yorkshire Bank, in Glasgow and Leeds. Both were owned by the National Australia Bank, which also owns the BNZ.
New Zealanders often do well in the international corporate world because they start in smaller companies, so the grounding Kiwis get when they start is a real advantage, McGrath says.
“It’s broader than they get in places like the UK,” she says.
“I think New Zealanders tend to be a little bit more straight-talking and direct, and so that experience of working in New Zealand stood me in good stead.”
When the Global Financial Crisis hit in 2008 and 2009, it was a huge shock to the UK banking system.
There were banking failures and some large government bailouts.
McGrath was working for Lloyds at that point.
Lloyds didn’t collapse, but it required government support after its acquisition of the failing Halifax Bank of Scotland (HBOS).
McGrath says she has two vivid memories from that era.
“One was people queuing outside bank branches to get their money out. As a CEO, it completely reinforces that confidence in your bank and in the banking sector is absolutely fundamental,” she says.
“The other thing I remember is getting a call from the Bank of England, late on a Sunday night, to ask precisely what the balances were in the bank at the time. That really reinforced the fragility of the system and a sense of being right in the thick of it.”
Banking chief executives often find themselves in the thick of it, of course.
In both Australia and New Zealand, there has been a lot of public scrutiny and political debate about the scale of bank profits.
In its last full-year result (the year to September 30, 2024), Westpac saw its net profit rise 10% to $1.06 billion.
Despite the tough economy, it delivered another 10% bump in the half-year to the end of March, to $525 million.
“I think the profits are big,” says McGrath. “Being big doesn’t necessarily make them the wrong size. The reason that the profits are big is because of the size of the balance sheets that the banks have and the way that they can support the economy to grow.”
When the local banks are benchmarked against similarly sized overseas markets, the profits are about right, she says.
“The best way to try to measure, ‘are New Zealand banks making too much money?’ is to look at something called return on tangible equity,” she says.
“If I look at markets like Ireland and the Netherlands, which are of similar size, our return on tangible equity is about the same.”
It’s easy to forget just how crucial banking is for modern society to work, McGrath says.
“We, including me, forget the things that we don’t pay for. So I do expect that I can go out, I can make a payment, it’ll move, I can get what I want immediately and that it will work all the time and that it’s safe.
“I think it’s understandable that people would say ‘You make big profits’,” she says.
“I think that’s particularly acute in New Zealand because the banks are very big companies in New Zealand relative to the scale of other New Zealand companies.”
The other thing to remember was that New Zealand needs outside investments to come in to support the borrowing that we do, she says.
“So for banks to be able to access those offshore markets in the US, in the UK and Europe, the investors need to see that they’re going to get a return that’s comparable to other places that they could send their money,” she says.
“Which is why ours being comparable is actually really important.”
Listen to the full episode to hear more from
Money Talks is a podcast run by the NZ Herald. It isn’t about personal finance and isn’t about economics - it’s just well-known New Zealanders talking about money and sharing some stories about the impact it’s had on their lives and how it has shaped them.
The series is hosted by Liam Dann, business editor-at-large for the Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
Money Talks is available on iHeartRadio, Spotify, Apple Podcasts, or wherever you get your podcasts.