Speaking strictly as a matter of self-interest, I’m disappointed First Niagara’s board has given the heave-ho to its CEO John Koelmel. Koelmel was shaping up to be a 21st-century version of the legendary Hugh McColl: a blindly ambitious bank CEO willing to dilute his shareholders again and again, via one deal after another, in pursuit of his own dreams of banking empire. McColl’s shareholders may have been abused along the way during his dealmaking frenzy two decades ago, but those deals did wonders for bank-stock valuations generally. As an investor in bank stocks (but not in serial diluters), I’m in favor of that--and was hoping Koelmel’s ambitions would do for bank-buyout fever in coming years what McColl did for it in the 1990s. It’s hard to believe now, but transactions at 5 times book back then weren’t uncommon. Ah, those were the days.
So as I say, part of me is disappointed. On the other hand, First Niagara’s board did absolutely the right thing in shutting down Koelmel’s growth-via-acquisition-no-matter-the-price strategy. Rollups via stock deals are almost always doomed to fail. The “growth” they create depends entirely on a premium-priced stock that can be used as a currency. But as the deals become bigger and bigger (as they must), that premium becomes harder to sustain. When it finally collapses, shareholder pain can be brutal. First Niagara holders have begun to endure some of that pain, and the board was absolutely right to act to alleviate it. Based on the market’s early reaction, relief is on the way.
In the meantime, First Niagara has a strong franchise in some attractive and highly underrated markets. The right CEO there has an opportunity to add real value. In case the board is open to suggestions as to whom it might consider—and it should be--allow me to suggest the following three individuals. Each is a great candidate:
Al de Molina, most recently CFO of Bank of America, has had a long and successful career in banking and is one of the smartest and most capable bankers I know. He would be a great CEO.
Cathy Nash engineered one of the most impressive post-crunch credit turnarounds so far when she brought Citizens Republic back from the brink and engineered its sale to First Merit. She is a proven moneymaker.
Brad Warner ran the retail operation at the old Fleet/Bank of Boston and understands the banking industry inside out. He has a solid record of success at whatever he’s done.
Any of these individuals would do a great job leading First Niagara. In the meantime, if it makes the right choice, the board has a solid opportunity to do the right thing for shareholders.
What do you think? Let me know!