Bank of New York Mellon delivered unexpected news after the markets closed Wednesday, announcing that Chairman and CEO Robert Kelly has departed, and has been replaced by Gerald Hassell (below), who has been president of the company since 1998. Hassell will continue to serve as BNY Mellon’s president.
In its official statement on the change, BNY Mellon said Kelly stepped down as chairman and CEO “by mutual agreement with the board of directors, due to differences in approach to managing the company.”
No one at BNY Mellon (BK) or Pershing, which operates the largest clearing firm for independent broker-dealers and a custodial platform for RIAs, Pershing Advisor Solutions, was available for comment on how, or if, the change at the top of BNY Mellon would affect Pershing and its clients.
The announcement came as a surprise to most banking analysts, though Kelly had faced criticism from some of them. A Reuters report quoted Gerard Cassidy, an analyst at RBC Capital Markets, as 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.”
Cassidy was referring to a lawsuit the firm faces alleging it overcharged pension funds on some foreign exchange trades, and the bank’s Aug. 10 announcement that it 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 transfers to cheaper locations, cutting its procurement budget, and consolidating real estate positions.
Bloomberg quoted Richard Bove, an analyst with Rochdale Securities, as 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.
On July 19, the company slightly beat consensus expectations on its second-quarter 2011 earnings with EPS of $0.59. In its earnings report then, it said overall profits rose 11.7% from the same period a year ago to $735 million. Assets under management rose 22% in the period, with $32 billion of net flows in Q2, while assets under custody and administration rose 21%.
Clearing services revenue from BNY Mellon’s Pershing unit was $290 million in the second quarter, flat against the $290 million it reported in the first quarter but up 21% from the $240 million reported in the first quarter of 2010.