Bank of New York Mellon delivered surprise news late Wednesday with the announcement that Chairman and CEO Robert P. Kelly has left after disagreements over the way he has run the company. He has been replaced by Gerald L. Hassell, who has been president of the company since 1998.
According to Bloomberg, the departure of Kelly was by mutual agreement with the board of directors. While the statement did not specify the disagreements between Kelly and the board, the report mentioned talk that Kelly had placed blame for some of the company’s problems on other senior managers, which alienated some directors and top managers. He was also reported to have become difficult to work with.
BNY Mellon is the parent company of Pershing, which operates the largest clearing firm for independent broker-dealers and a custodial platform for RIAs, Pershing Advisor Solutions. At this year’s Pershing Insite conference, Kelly spoke of the challenges of running a bank in the current environment.
According to a New York Times report, Kelly was also thought to be not as engaged in the bank’s daily operations as board members wished. It also said the blowup between Kelly and the board had been looming for a while.
The company has suffered a decline in stock price of some 32% in 2011, as well as becoming the target of a lawsuit over allegations of overcharging pension funds on foreign exchange trades, and an accusation by the New York Attorney General that it violated state law in representing investors concerning mortgage securities.
On Aug. 10, the bank had announced plans to cut 1,500 jobs—3% of its workforce; Kelly said around that time that “expenses have been growing unsustainably faster” than revenue and in a July conference call had spoken of cost-cutting measures that included personnel transfer to cheaper locations, cutting its procurement budget, and consolidating real estate positions.
The announcement, made after the close of business, was completely unexpected by analysts. A Reuters report quoted Gerard Cassidy, analyst at RBC Capital Markets, saying, “This is an extreme surprise. The company is currently facing two major issues, the planned downsizing and the ongoing foreign exchange litigation. We don’t know how or if his departure was related to them.”
Richard Bove, an analyst with Rochdale Securities LLC in Lutz, Florida, was quoted by Bloomberg saying, “I said two weeks ago Bob Kelly should be fired and I gave several reasons for it.” He added that Kelly was “too conservative” in setting prices for the bank’s products and using the balance sheet to make money.
Alexander Blostein, a research analyst covering Bank of New York Mellon for Goldman Sachs, was reported by The Times to say, “The announcement of Mr. Kelly’s resignation and its timing were unexpected, which introduces new uncertainty to the stock, in our view. While the exact reasons behind Mr. Kelly’s departure are unclear, we believe the firm’s focus under the new leadership could shift to more aggressive cost management and business rationalization and away from acquisitions.”