‘Asia is our future’, former bank CEO says of Australia

In the course of a banking career spanning three decades, Mike Smith has never been one to mince his words. Thus he makes no apologies for his views on Australia and its place in Asia.

“Asia is our future. It’s that simple,” the former CEO of Australia and New Zealand Banking Group (ANZ) said.

Smith, 60, stepped down as CEO in late 2015 — after eight years of positioning the bank to capitalize on Asia’s enormous growth. He is now senior adviser with professional services group PwC’s Asia practice as he helps expand its role in the region.

Smith is credited with giving ANZ a presence in Asia when other banks were pulling back. Whenever his decisions were criticized, he countered: “We are looking at the long term — not the short term.”

Growth in Asia may be slowing but it will continue to grow, he said.

One of the world’s most respected bankers, Smith spent much of his career with the HSBC Group, which took him all over the world. He has a strong affinity with Asia and especially Hong Kong, where he was head of commercial banking for HSBC.

“Asia’s very special,” he said from his office in Melbourne, the city that is now his home.

“Flying into Hong Kong is like an adrenaline shot in the arm. The place is efficient and it works. It still has that ‘can do’ attitude rather than the cynical attitude we have in the political and media cycle here (in Australia).”

Born in Derbyshire, in the East Midlands of England, Smith spent his formative years boarding at the country’s prestigious Cheltenham College.

“My father was a computer guy with IBM. So they were constantly moving around, living an expat lifestyle, and kids like me went to boarding school.”

Despite the lifestyle, Smith did not see himself following in his father’s footsteps at a technology firm.

“As for banking,” Smith said, “it didn’t enter my mind. I saw myself in the Royal Navy. I liked the idea of that swashbuckling lifestyle when growing up.”

Smith’s introduction to the banking world came while visiting his parents, who were then based in Nairobi, Kenya.

“My parents took me to cocktail parties and dinners, the sort of thing you did as an expat. I soon realized that the best houses were occupied by bankers. I thought to myself this can’t be too bad a job.”

Smith also wanted to get out of England, so he applied to as many major international banks as he could.

“Most of them were American, but the first letter I got back offering me something was from HSBC.”

Smith excelled at the bank, climbing the corporate ladder quickly and even “took a bullet” when he was head of HSBC in Argentina from 1997 to 2003.

“The bank we took over at the time had some problems and we uncovered quite a bit of corruption,” he said.

Smith said he must have upset a few people as someone tried to have him kidnapped and, in the confusion, he was shot.

That experience, however, did not deter Smith. He stayed on for another three years before moving to Hong Kong in 2004 to become president and CEO at HSBC.

“The economic collapse of Argentina (2001-02) was a remarkable experience to live through,” he said.

In October 2007, he was lured to ANZ — one of Australia’s “big four” banks and among the top 15 global financial institutions.

Smith was reluctant at first to leave HSBC, but he knew when “the time was right”, he noted.

“You could see the storm clouds of the global financial crisis gathering and it looked like a good time to move on.”

ANZ announced in November 2016 that full-year profit had dropped 24 percent to A$5.7 billion ($4.2 billion), hit by nearly A$1.1 billion in writedowns. Still, it is among the most profitable banks in the world with a presence in 33 countries and staff of 47,000.

Although he officially stepped down as the head of ANZ, Smith still holds an advisory role at the bank’s Melbourne headquarters.

He now has more time for himself, family and great loves: wine and classic British cars.

He also has time to reflect on the things he is passionate about — Australia, its role in Asia and its relationship with China.

He feels the recent United States presidential polls have thrown up an added dimension with the election of Donald Trump. “It’s going to be a fascinating four years,” he said.

“How it is going to work out is anyone’s guess, but if we look at what people in his new administration have said, what the man himself has said, they have not joined the dots.

“I mean it’s policy on the fly,” Smith said.

“The push for infrastructure is a good example and a commendable one. But, it is going to need a great deal of investment and the money is going to have to come from somewhere … probably the public sector initially.

“How does the government raise money? It has to borrow. And who is the biggest purchaser of US government securities? China. And the US cannot afford to get China offside by imposing tariffs on imported goods from China, can it?”

Trump’s proposal to scrap the Trans-Pacific Partnership trade agreement is another example of the president-elect “playing to his domestic audience”, Smith said.

“A lot of jobs have gone from the US. But at the same time 1 billion people in Asia, Africa and South America have been lifted out of poverty,” he added.

“Walk into Wal-Mart in the US and the cost of products has been reduced significantly in real terms. I can’t see the average American who pays a dollar for a pair of socks in Wal-Mart, which are made in Vietnam, paying $14 for a pair made in the US.

“It’s just not going to happen and the irony of all this is that the TPP favored the US market.”

The cancellation of the TPP deal is “an opportunity for China to fill the void”, he said. “In fact, it is a great opportunity for Asia and Australia.”

Even though Australia is now his home, Smith is not afraid to speak his mind, especially when it concerns Australia and its future.

“Australia missed the financial crisis,” he said, but it has been slow in engaging Asia.

“You only have to look at our investment in China — it is tiny.” Many Australian businesses lacked the appetite for risk with regard to investing in China and the region, he said.

“It is a short-term view, but trade and investment relationships in Asia just don’t happen overnight, they take time.”

Smith blames “complacency” and the fact that anyone under the age of 40 has not seen a recession.

“They have not seen what it is like in bad times,” he said.

“Australia is still very dependent on inward capital flow. With a massive landmass like Australia and a small population, the cost of maintaining a balanced economy is very high.”

To offset this, Smith observed: “Australia must pursue as many trade opportunities as it can, especially in Asia, to reduce those costs.”

former CEO of Australia and New Zealand Banking Group

TO CHINA DAILY PROVIDED Mike Smith thinks Australia has been slow in engaging Asia.