Downturn bottoming out, says Australian banker

National Australia Bank's new CEO Cameron Clyne says the global financial crisis may have bottomed in the US and UK, but added that he could not be sure.

Nonetheless, Clyne's judgment that the financial crisis is at or near the bottom is the most positive view so far from a leading member of the business community.

Clyne said many people were optimistic that the worst of the crisis may be over, and this had been reflected in recent rallies in share markets around the world. "I think, unfortunately we have had too many false dawns for us to declare it," he said during a speech yesterday in Melbourne.

"You'd have to say, though, in certain economies like the UK and the US, they are 18 months into this cycle, so you've got to believe they're closer to the bottom than they were,'' he said, adding that policymakers now had to consider how long the economy might remain there.

"Is this going to revert back towards to end of 2009? Or are we in a fundamental change in cycle? We might be in the next three to five years. The simple answer to that is that I don't know," Clyne told an Australia Israel Chamber of Commerce at a lunch meeting.

The issue for policymakers, he said, was the likely length of the crisis, and whether a sustained recovery was in prospect towards the end of this year, or would it be a persistent downturn lasting three to five years.

But Clyne said it was too early to start thinking about removing the deposit and wholesale funding guarantees introduced by the federal Government in October. "Any time the question around the deposit guarantee is raised, our call centre lights up," he said. "People want stability."

Clyne also outlined a plan to rebuild public trust in the banking industry, saying banks had only themselves to blame for the low esteem in which they were held by the public.

The NAB, he said, planned to attack key issues, including communication around interest rate adjustments, access for disadvantaged persons, and improved transparency around fees.

 "What we want to eliminate is that niggling doubt too many people have that their banks are trying to outsmart them with fees and whacking them hard for small oversights," Clyne said.

'They call us bastards'
Admitting that many customers think banks are ''bastards'' and mistrust them over fees and other charges, he said, "I want NAB customers to be confident that they will only pay fees for services they explicitly want. I want fees in our industry to be easily understood and transparent in a commonsense way, instead of merely meeting legal disclosure."

Clyne conceded that NAB had been guilty of not listening enough, and promised changes to clearly explain fees before people signed up for products and services. But he defended the need to earn healthy profits. He also indicated there was no guarantee NAB would pass on in full any interest rate cut by the Reserve Bank of Australia next month.

The comments follow the bank's recent backflip on a hated 50-cent "foreign" ATM fee. Clyne said the bank had to balance profits with the need to repair its reputation. NAB netted a $4.5 billion profit last year, raking in $530 million in fees.

Clyne said banks were paying the price for failing to explain how costs and risks affected interest rate decisions. Banks have been blasted for failing to fully pass on official interest rate cuts.

He agreed at a later press conference that he was putting himself "out on a limb" in relation to a problem that would take some time to deal with. ''But you can't live in a state of denial; it's not helpful for the industry to turn a blind eye to the issue that we're not respected," he said.

 Clyne also welcomed any return of the second-tier financial institutions that have largely disappeared as a result of the crisis. He said the system functioned best when there was foreign bank participation, as well as regional banks and non-bank financial institutions.

"For a whole series of reasons, you can't just have four banks operating the economy," he said. "I think it's the responsibility of the industry over time, as the situation starts to stabilise, is to actually get back to having a vibrant second tier and regional banking structure, as well as non-bank financial institutions and foreign banks."