Will Bank of New York Mellon (BNY Mellon) be more or less likely to go ahead with staff cuts now that its chief executive officer has stepped down?
Right now, there is little agreement on what direction the new chief executive will take.
Bloomberg reports this week that Wall Street analysts believe BNY Mellon, the world's largest custody bank, may become still more aggressive in cutting costs after the sudden departure of Chief Executive Officer Robert P. Kelly.
"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," Alexander Blostein, an analyst at Goldman Sachs Group Inc. in New York, wrote in note to clients.
At the same time, On Wall Street quotes a report by Keefe Bruyette & Woods analysts Robert Lee and Jacob Troutman suggesting the very opposite.
"Our initial thought is that Kelly may have wanted to make more dramatic cuts and/or strategic changes in the business, such as additional business dispositions, than the board," Keefe, Bruyette & Woods' report said.
Kelly, who had run the company since 2007, stepped down in "mutual agreement" with the board, the BNY Mellon said. His successor is Gerald L. Hassell, who has been president of the bank since 1998.
Early last month eFinancialNews reported that BNY Mellon said it planned to trim , 1,500 positions or approximately three percent of the company's global workforce of 48,900 employees.
In a conference call with investors in July, Kelly said expense growth at the bank was simply "too high," giving escalating costs for pensions, compensation, health care and legal bills.
"The announcement of the job cuts came less than a month after the report of strong earnings. That time lag could suggest an internal debate about the direction of the company," Keefe, Bruyette & Woods' report said.
"As a 30-year veteran of BNY Mellon and board member for 13 years, our initial take is that Hassell may have been perceived by the board as more likely to adhere to the current strategy and less likely to seek more dramatic change," the investment bank concluded.
On the other hand, as Bloomberg notes, custody banks have been hurt recently by persistent low interest rates and BNY-NY rival State Street Corp., the third-largest custody bank, moved earlier and even more dramatically to cut costs, observed John Stilmar, an analyst with SunTrust Robinson Humphrey Inc. in Atlanta.
State Street, based in Boston, said in November it would cut 1,400 jobs, or 5 percent of the workforce, by the end of this year as part of its own effort to slash as much as $625 million in expenses annually. "If State Street can do it, so can BNY Mellon," Stilmar said.
"BNY Mellon has been a little slow to jump on the bandwagon," adds Gerard Cassidy, an analyst with RBC
Capital Markets in Portland, Maine.
Kelly, who came from Pittsburgh-based Mellon Financial Corp. when it was acquired in July 2007 by Bank of New York Co., was thought of as someone willing to spend money to expand the bank, Cassidy said. Hassell, his successor, has been a career employee at Bank of New York, an institution known for frugality, Cassidy concluded.
BNY-Mellon continues to be a major player in the wealth management space, as well as custody, and this week separately announced the appointment of Sally Rubin as a director of Charitable Gift Services Investments.