The role of CEO for a bank has never come under such scrutiny in modern history. Venerable institutions like Citigroup (NYSE: C) replaced their CEO Chuck Prince just last year, Bank of America (NYSE: BAC) finally has Ken Lewis’ replacement just before the self-imposed deadline, and many other firms are confronted with retiring superstar CEO’s.
Now, the industry’s attention is turning to Bank of New York Mellon (NYSE: BK), whose Chairman and CEO Robert Kelley is now on the hot seat. Earlier this year it was leaked that he turned down the Bank of America role, and now equity researchers are making some assumptions on his own commitment and potential for success with his current firm. Rochdale Securities analyst Richard Bove published a report Monday questioning Kelly’s commitment to Bank of New York Mellon, citing a report in The Wall Street Journal which stated that Kelly withdrew his name from consideration for the top job at Bank of America after Treasury officials expressed concerns that a $35 million to $40 million pay package he sought “might cause alarm and be seen as excessive.”
Given this information, many are questioning Kelly’s commitment to Bank of New York Mellon, since a lack of pay restrictions might have catapulted him to Charlotte. BNY Mellon spokesperson Rob Gruendl commented that “Bank of America pursued Bob Kelly and they never really got close.” However, this should not ease the concerns of investors. Bove rhetorically asks “Is he here for the duration or will he jump if some other institution, not as influenced by the government, meets his price?”
In any case, calls for Kelly’s ouster may be a theme for 2010, since Bank of New York Mellon stock is well below where it was when Kelly took over as CEO of legacy Mellon Financial in February 2006. Bove argues that the main reason the firm, and industry really, is lagging is because they have not been charging enough for its core business of transaction services, such as processing debt payments made by the U.S. Treasury. Bank of New York Mellon has about a 50% market share in this line of business, while their closest competitor, JPMorgan Chase (NYSE: JPM), has only 25% of the market. In other types of transaction services and custodies businesses, Bank of New York Mellon also has few competitors, aside from State Street, Northern Trust and, in some instances, JPMorgan, U.S. Bancorp (NYSE: USB) and Citigroup (NYSE: C). Clearly, Kelley has his work cut out for him, and will have to get to work quickly before these ouster calls grow more loudly.
