11/05/2004 - 22:00

Budge holds form to the end

11/05/2004 - 22:00

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One of WA’s longest serving CEOs, Terry Budge’s seven-year tenure at BankWest largely overlapped the bank’s time as a listed company and was constantly overshadowed by takeover talk. Mark Pownall talks to the outgoing group managing director.

Budge holds form to the end

TERRY Budge is certainly consistent.

As he prepared to quietly exit the role of group managing director at BankWest this week, he maintained the restraint that has been a hallmark of his seven-year tenure at the helm of the biggest Western Australian-based financial institution.

No dark secrets revealed, no pot shots at anyone who had made life difficult, just that usual banker’s glint in his eye, comfortably assured that he knows more than you do.

He is a bank manager, after all.

It is the sort of restraint that has allowed him to become part of the furniture in corporate Perth without necessarily attracting the kind of attention the head of one of WA’s heavyweights probably should.

His track record is certainly worthy of some recognition.

The bank has grown substantially under his guidance, though its share price did not entirely reflect this growth.

His time at the bank was almost always overshadowed by the endless cycle of speculation between take-over and abandonment that arose from the cornerstone shareholding of UK-based Bank of Scotland, which merged with Halifax Bank to become HBOS during the period of Mr Budge’s reign.

It is something that he and those he worked with agree was a difficulty that could never have been foreseen before he took the job.

For the record, BankWest’s asset base grew to $28 billion from $14 billion in the seven years Mr Budge ran the bank. Loans more than doubled to $22 billion from $9.3 billion and operating profit grew from $93 million to $186 million, a figure that includes significant costs associated with the HBOS privatisation of BankWest last year.

The share price grew from about $2.75 to close at $4.25, the HBOS offer price.

Shareholder funds grew from $630 million to $1.3 billion at the same time.

It was a top five WA listed company, yet Mr Budge’s departure hasn’t attracted half the attention that Wesfarmers boss Michael Chaney has by announcing Richard Goyder as his successor 15 months ahead of the actual handover.

Not that the reserved banker ever appeared to want attention or looked entirely comfortable in the spotlight – especially when much of the speculation surrounding the bank appeared to have been generated from half a world away.

The machinations of his European-based parent company certainly affected Mr Budge’s career at the bank, after arriving in Perth in May 1997 from a senior role at National Australia Bank in Melbourne to work as chief operating officer, before taking over BankWest’s management seven months later.

He said he had not expected the volatility that flowed through from the parent company.

“They were going through a situation themselves with the merger with Halifax,” Mr Budge said.

“There was instability I had not anticipated.”

For much of his seven years there was ongoing speculation that BoS, and later HBOS, was either going to take out the other shareholders and privatise BankWest, as it eventually did, or, conversely, abandon its presence in Australia, potentially leaving the Perth-based bank as a sitting duck.

“Going into any business, it never works out how you might think. The path was not the same as you would imagine, that is the great side of business,” Mr Budge said.

“The satisfying part of that is to move through those challenges.

“I am pretty happy with the way the bank is; it is twice the size it was.”

This, he said, was pretty much in line with the performances of all the major banks – not bad for a regional operator considering the competition coming from the big four.

Of course the relationship with the UK was not all bad, either.

Much of BankWest’s growth has come off the back of the parent’s success. BoS was an Edinburgh business which had succeeded in becoming a player in the much larger southern UK market.

Mr Budge points to the fact that half the bank’s business is now derived from interstate as a major success and a key to the growth the business has achieved.

Despite the distant lines of communication, and the constant ownership doubts, the relationship worked.

“I would say that [interstate growth] was the proof,” Mr Budge said.

“We sat down with them and decided that was what was interesting. It had to be done in a controlled way; rapid expansion in banking is very risky.

It is perhaps ironic that, as Mr Budge leaves his 47th floor office for the last time this week, the bank capturing the market’s attention for all the wrong reasons is his old home, NAB.

He could be forgiven for sympathising with his former colleagues as the NAB struggles through a public relations nightmare ostensibly centring on a big derivatives trading loss.

In the latter part of his stint, Mr Budge was forced to confront some embarrassing losses, and was taken to task by the media for bad debts that pale into insignificance against the kinds of losses that NAB has racked up during the past few years.

Most notably, BankWest had to make a provision for $10 million against its 2002 annual result after being caught by the financial failure of Selwyn Mines. It consequently decided to scale back its resource banking operations.

In the same result it also had to include a write-down from its decision to exit a financial planning partnership with Plan B.

In the same year, BankWest paid $9 million to acquire part of the Barrington Estates Group, an eastern States-based winemaker that had run into financial trouble.

These events took the sheen from Mr Budge’s last full year profit result as a listed entity – a year when loans had jumped almost 12 per cent to $21.7 billion and home loans were up 23 per cent to $11.5 billion.

But, as constrained as ever, Mr Budge bears no grudges against a media that focused so much attention on this painful, but ultimately insignificant, setback.

“There were a couple of credit issues along the way,” he said.

“We have worked them through.

“It is easy for journalists to pick these up and keep repeating them.

“Were they significant? No, it was a normal part of banking.

“It is a part of learning; you change your operations and make sure they don’t happen again.

“Managing perceptions is hard, the general community gets information from the media rather than reading annual reports.”

There was one particular time in Mr Budge’s years at BankWest when the takeover speculation was more home-based.

This was the possibility of merging BankWest with Sydney-based St George Bank to create a more formidable competitor to the big four.

Mr Budge will do little more than say discussions between the two parties were “extensive” but were cut off prematurely when the news, leaked pushing St George’s share price down and BankWest’s up.

The BankWest chief is coy about what might have been and would not describe it as a lost opportunity, either for the bank or himself.

He said the final structure of the merger was never discussed, therefore any role he would have played was mere speculation.

As a comparison, Mr Budge points to the merger that created his parent company, where BoS’s prowess as a business bank merged with Halifax, a largely retail-focused entity.

“The business bank of BankWest was bigger than St George, that reflects where St George came from,” he said. “It was a building society.

“BankWest was a commercial bank, it was not a regional bank like others, it was created from agriculture.”

BankWest chairman Ian Mackenzie also said that discussions were cut off too early to know how the merger, to create a “small major”, as he puts it, would have been structured.

But Mr Mackenzie, who felt the deal would have been good for BankWest shareholders, is less hesitant about who would have run the amalgamated bank, suggesting that St George’s then CEO Ed O’Neal, who tragically died in the role in 2001, was the main candidate.

“I would have thought that Terry would have played a major role,” Mr Mackenzie said.

The only other publicly known opportunity for Mr Budge to command a banking role beyond BankWest may well have been lost by the time HBOS took to deliver on the speculation and privatise its Australian operations to create HBOS Australia.

Mr Mackenzie said Mr Budge was considered for the HBOS Australia role, having met all the challenges of the past seven years, including “difficult” times when the commitment of BoS or HBOS to Australia was uncertain.

But, already one of Australia’s longest serving chief executives, it seems the 52-year-old Mr Budge had simply been in the job too long.

“Whoever takes this role needs to commit for five to seven years,” Mr Mackenzie said.

“Anyone in the job for 12 to 14 years, the feeling was, that this was a good time to stop.”

Confirming he will remain based in Perth, Mr Budge agrees it is time for a career change, and is looking at the possibility of directorships and remaining a player at the Institute of Company Directors, where he is president of the WA chapter.

“The new [HBOS] role would have required me to spend a lot more time in, and probably live in, Sydney,” he said.

“It is not a listed company, so the role is different in that respect.

“It is the right time to go.”

But he doesn’t see a shift to non-executive board level as the big step down it used to be. The nature of directorships is changing.

“The gap is closing [between CEO and director]. Organisations are requiring younger directors, at the same time CEOs jobs are becoming more intense.”

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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