A pom shines down under

Managing banking crises at both ends of the world is probably not the sort of early retirement activity John Stewart was thinking about when he quit Barclays Bank and headed off to his farm in Meopham, Kent last year.

After four months in Australia leading the National Australia Bank through the worst crisis of its 147-year history, he is this week back in London attempting to sort out its underperforming group of British banks.

If Stewart really wanted to pursue his lifetime loves of sailing and scuba diving then he is probably wishing he never got out of bed to answer a 1am call from the NAB's patrician chairman, Charles Allen, who asked him to get on the first plane to Melbourne, the state capital of Victoria on mainland Australia's southern tip.

The 55-year-old banker was shocked by what he heard in the early hours of Saturday, 31 January, but it was only a foretaste of what was to come. Australia's biggest lender - one of the world's top 20 banks - slipped into a crisis that would decimate the ranks of top management, start a bruising boardroom brawl and cost hundreds of millions in lost shareholder value.

The following Monday Stewart landed at Tullamarine Airport, Melbourne. A few hours later he held a press conference at which he tried to field questions about how a group of rogue traders - one of them a self-proclaimed Buddhist - had managed to lose £135 million by taking bets that the US dollar would regain its losses against the Australian dollar. What had turned a comparatively minor loss - it represented two weeks' profit for the bank - into a crisis for board and management was a widespread feeling that the team of the resigning chief executive, Frank Cicutto, was not up to the job.

Investors were already angry with him over an inept push into the American mortgage market that lost £1.7 billion, a bungled bid for the Australian insurance giant AMP, what was seen as weak strategy and problems with the bank's culture.

'It was about a lot of pressure building up behind a dam for a period of years, and the Forex was merely the catalyst. The dam burst and everything spilled out,' said Stewart, the first non-Australian to lead the bank.

The decision of his predecessor, Cicutto, to appoint PriceWaterhouseCoopers as auditors to produce an independent report on the Forex losses caused an even greater crisis. A board member, Catherine Walter, was so aggrieved at being found partly responsible for the losses that she threatened to have the entire board spilled at an extraordinary general meeting. The crisis was only averted after the new chairman, Graham Kraehe, agreed to step down with her.

'When you have lost your chief executive and chairman and a few members of the board and the management team, it's fair to say you are at a strategic inflection point. We are in a situation where all bets are off. There's no sacred cows. We can actually run the company we wish we had,' Stewart said.

In his short time in the top job he has had to present two damning reports exposing management and culture problems. A criminal investigation into the Forex losses and a report by America's top securities watchdog, the Securities and Exchange Commission, are also pending.

If the bank was looking for some unconventional ideas to resolve its prob lems, then it chose an unconventional banker for the job.

The former Edinburgh school student tells friends how he dropped out of Heriot-Watt University, where he was studying chemistry, to become a scuba diver. He left his first job with the insurance company Legal & General to join the Woolwich Building Society in 1977 as an office boy opening mail. He worked his way up to become a branch manager, where he turned to union leadership and impressed the management with his negotiating skills.

He says the best periods in his 37-year banking career were developing financial advisory, insurance and wealth management subsidiaries for the Woolwich. By 1989 he was managing Woolwich Independent Financial Advisory Services and six years later he was running the society, where he claims to have beaten the big banks at their own game with an IT innovation called open plan banking.

The married father of an adult daughter and son made his name in the City of London a year later when he oversaw the Woolwich's conversion to a bank, followed by its listing on the FTSE 100.

He later negotiated Woolwich's buy-out by Barclays for £5.8 billion, a 35 per cent premium on the shares, and took up the position of deputy chief executive.

Stewart now admits that he did not like the Barclays job and only stayed on after the takeover to ensure that Barclays' shareholders got what they paid for. Some critics claim that at Barclays he 'sank without trace'. Yet at the NAB, Stewart's personal contrast with his predecessor could hardly have been more dramatic. Cicutto, who was the epitome of a company man, hated presenting to large groups, was bad at reading at a lectern and generally left detailed presentations to his chief financial officer.

Stewart roams the stage like a lay preacher, peppers his presentations with jokes or anecdotes and generally impresses with his grip on the numbers and his candour. Analysts say this is his 'weapon of mass seduction' - but they are still anxious to see more signs of reform.

He is repeating a tested strategy from the Woolwich days whereby he challenges staff to think about what customers really want by holding a series of 'Let's Talk' seminars around Australia. This Tuesday, Stewart will convene his first board meeting in London as NAB chief executive. The four-day review of operations will focus particularly on the bank's struggling British operation, which has yet to establish a national identity.

The bank's Financial Services Europe operation, which employs more than 11,000 staff and has some 3.5 million customers, covers the Clydesdale Bank in Scotland, Yorkshire Bank in England, Northern Bank in Northern Ireland and the National Irish Bank in the Republic of Ireland.

Stewart's strategy is expected to concentrate on streamlining and moving into niche banking in the south of England, while addressing under-investment and customer attrition in existing markets. In recent half-yearly results, earnings from the European operation - which account for about 25 per cent of the group's profit - fell by 30 per cent.

He wants to cut duplication by adopting a 'one kitchen and four dining rooms' strategy, which he says will enable rapid response to customer needs across the banks while differentiating services.

'There is not an awful lot wrong with the banks but some aspects have come off the boil. To get them moving we have to get the right people and the right culture. I believe in Europe we can create real value by developing rather than selling them,' he said.

Stewart recently revealed that his favourite film was the Tom Hanks tear-jerker Sleepless in Seattle . With no track record of running a complex bank and the honeymoon period running out, he could find himself sleepless in a lot more cities in the months to come.

Profile
Name John Stewart
Age 55
Education Bachelor of Arts (Social Sciences), Open University Career 1977: joined the Woolwich, working in a wide variety of roles in the retail network. 1996: chief executive Woolwich. 2000: deputy chief executive of Barclays, following the acquisition of Woolwich by Barclays in October 2000. February 2004: appointed managing director and chief executive of National Australia Bank
Family Married with adult daughter and son
Interests Sailing and scuba diving