Australia | Aug 20 2007
By Chris Shaw
One man’s loss is another man’s gain is a maxim that holds true for corporations as well, at least in the market’s response to the announcement of Gail Kelly being appointed as the next CEO of Westpac Banking Corporation (WBC) from February next year.
Analysts are generally positive on the appointment for the bank but at the same time see some potential negative implications for St George Bank (SGB), noting the bank must now find a replacement for a boss who delivered very strong performance over the past few years.
Paul Fegan has been appointed acting CEO until a decision is made, JP Morgan expecting he will get the job but Deutsche Bank seeing a number of possible candidates including newly appointed chief financial officer Michael Cameron and ANZ head of personal banking Brian Hartzer.
ABN Amro suggests a quick appointment would be a positive as it would limit the damage of any loss of momentum in operations as a result of the management changes. The broker suggests the process could have some destabilising impact and so sees scope for some share price weakness short-term, Deutsche agreeing there is scope for disruptions as some of the St George management team are likely to follow Kelly to Westpac.
JP Morgan points out the move is a big step for Kelly as Westpac is a far more complex organisation than the bank she has left, particularly as she has limited experience outside of retail banking.
There will also be the challenge of holding together the management team, the broker seeing scope for some departures from managers unhappy at their positions or at being passed over for the top job.
Having said that, the broker points out the bank Kelly will inherit is in a far stronger position that the one her predecessor David Morgan inherited. ABN Amro doesn’t see any major change in strategy with Kelly in charge, though Deutsche Bank suggests her experience in retail banking suggests that division is likely to be an early point of focus.
The FNArena database shows no changes to ratings for St George immediately following news of Kelly’s departure, the stock currently rates as Buy once and Hold nine times with an average price target of $35.82.
There were no changes in Westpac ratings either and the bank remains a broker favourite with six Buy and four Hold recommendations and an average price target of $28.79. Shares in both banks are stronger today and at 12.15pm were 4.9% or $1.23 higher at $26.43, while St George was up $1.13 or 3.5% at $33.71.