* NAB is first bank to lose top exec over inquiry
* Investors in favour of internal candidate
* Former NSW premier Baird seen as favourite (Updates shares, adds candidate names, updates investor quote)
SYDNEY, Feb 8 (Reuters) - National Australia Bank Ltd began a global hunt for a new CEO and chairman on Friday after the incumbents quit in the wake of a misconduct inquiry, although most analysts tip a Sydney-based ex-politician to become the new chief executive.
The CEO of Australia's fourth-largest lender, Andrew Thorburn, and Chairman Ken Henry resigned on Thursday days after being singled out for strong criticism in the final report of a public inquiry into financial-sector wrongdoing.
Investors said they hoped the turmoil at the top of the A$69 billion ($49 billion) bank ended quickly with the naming of a CEO who could complete an ongoing restructure while satisfying public demands for greater accountability and fairness.
NAB invited applications from around the world but many analysts said the market favoured an internal hire for CEO given the time pressure - Thorburn finishes up on Feb. 28 - and the strong field of candidates inside the Melbourne-based company.
"We believe NAB has a number of solid internal candidates for CEO, with Mike Baird ... a lead contender in our view," UBS analysts said in a note.
Baird, 50, left a senior job in investment banking to enter politics for the conservative Liberal party, becoming premier of New South Wales state from 2014 until his retirement from office in 2017. After politics he returned to banking as NAB's chief customer officer.
He appeared on Australian morning television on Friday to praise Thorburn but declined to comment when asked if he would apply for the CEO job.
Other candidates named by analysts include Craig Drummond, a former NAB chief financial officer and current CEO of health insurer Medibank Private Ltd, NAB's head of business banking, Anthony Healy, and Royal Bank of Scotland Group CEO Ross McEwan.
Most analysts said the interim CEO named by NAB, former Westpac Banking Corp executive Philip Chronican, was the frontrunner to be the new NAB chairman.
NAB shares were down 1.6 percent by mid-session, leading the financial index lower and underperforming the broader market which was down 0.5 percent.
'DON'T SCREW UP'
Thorburn and Henry are the first senior executive and board member of a top Australian bank to lose their jobs over the quasi-judicial inquiry which rocked Australia's financial sector over 11 months of hearings last year.
They join the heads of financial planners AMP Ltd and IOOF Ltd as the inquiry's biggest scalps, and while there may be more board-level resignations in the months to come few analysts expect the heads of the other "Big Four" banks to go.
The retired judge who ran the Royal Commission inquiry called out Thorburn and Henry for appearing unprepared to learn from past wrongs, but spared other bank bosses from criticism in his 1,000-page report published on Monday.
Both men had appeared at times testy and dismissive as they were publicly grilled by barristers assisting the commission about misconduct at the bank, including charging fees for services not given and aggressive sales tactics.
In contrast, the CEOs of Commonwealth Bank of Australia and Australia and New Zealand Banking Group Ltd were praised in the inquiry report for appearing to understand the need to improve bank culture.
Nathan Bell, head of Australian equities at InvestSmart which holds bank stocks but not NAB, said there was "plenty of people" that can replace Thorburn.
"It's an oligopoly sanctioned by the regulators and 'just don't screw up' is really all that's being asked," he told Reuters.
($1 = 1.4154 Australian dollars) (Reporting by Byron Kaye and Paulina Duran; Editing by Stephen Coates)