PNC Names Demchak to Succeed Rohr as Bank’s CEO
Demchak, 50, also joins the board of directors, with Rohr taking the new title of executive chairman, PNC said yesterday in a statement. The management change takes effect at the annual shareholders meeting on April 23. Rohr, 64, who currently serves as chairman, will retire from the company next year, PNC said.
The promotion caps a decade-long tenure at PNC for Demchak, who joined in 2002 from JPMorgan Chase & Co. to become Rohr’s chief financial officer. Demchak will inherit a bank whose performance has consistently beaten its peers, said Terry McEvoy, an Oppenheimer & Co. analyst.
“If it’s not broken, don’t fix it,” McEvoy said. “It’s not like this is a broken model. The company delivered during the financial crisis like few banks were able to deliver.”
In 2005, Demchak became head of corporate and institutional banking at PNC and was said to be among candidates considered for the top job at Bank of America Corp. in 2009 as fallout from the credit crisis pushed CEO Kenneth D. Lewis from office. Instead, Demchak was named head of all PNC businesses in 2010 and president last April.
“You could consider him one of the architects of the company’s current strategy along with Jim,” said R. Scott Siefers, an analyst at Sandler O’Neill & Partners LP. Demchak’s background as head of structured finance at New York-based JPMorgan made him “quantitative and very objective,” Siefers said.
Revenue at PNC increased 8.3 percent in 2012 to $15.5 billion, while profit slipped 2.3 percent to $3 billion, or $5.30 a share. PNC’s stock, which closed at $63.87 yesterday, has beaten both the Standard & Poor’s 500 Index and the KBW Bank Index this year by posting a 10 percent total return including dividends. The shares gained 29 cents to $64.16 at 9:30 a.m. in New York.
With $305 billion in assets, PNC ranks seventh among U.S. commercial banks and employs about 50,000 people. Acquisitions in the past two calendar years included Royal Bank of Canada’s U.S. operations and outlets of BankAtlantic Bancorp and Flagstar Bancorp in Florida and Georgia.
Demchak has said PNC must reassess the role of its approximately 2,900 branches. While branches build the brand and attract customers, “they’re really expensive,” accounting for 62 percent of retail banking costs, Demchak said at a November investor conference in New York.
PNC is closing more branches than it’s opening, and the new ones have less space and fewer employees, Demchak said. Meanwhile, more of its 5 million customers are embracing electronic banking, he said.
“It’s obvious that our approach needs to change in order for us to better serve our customers and for the retail bank to remain profitable for the future,” Demchak said. “Our goal is to drive more transactions from the teller window to the computer screen or the ATM.”
Demchak will also have to quell doubts from investors about the value of the firm’s mergers and acquisitions, McEvoy said.
“Can he convince the marketplace that their M&A strategy is value-creating and that it isn’t truly building a bigger bank just for the sake of size?” McEvoy said.
Fred Solomon, a PNC spokesman, said Demchak and Rohr weren’t available to comment.
Rohr said in the statement that Demchak’s “candor and work ethic have earned him the trust of employees and investors, and the confidence of PNC’s board. He deserves the opportunity to steer PNC into the future.”
While at JPMorgan, Demchak helped build the bank’s derivative business with William Winters and later jointly ran the investment bank with Steven Black. He sits on the board of BlackRock Inc., the world’s largest money manager, where PNC is listed as the largest shareholder.
He grew up in PNC’s hometown of Pittsburgh, according to “Fool’s Gold,” the 2009 book by Financial Times journalist Gillian Tett. Demchak received an undergraduate degree from Allegheny College in Meadville, Pennsylvania, and an MBA from the University of Michigan, according to the bank.
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