Mick McGuire of Marcato Capital Management is demanding a leadership change at Bank of New York Mellon. The activist hedge fund beneficially owns around 1.6% of the outstanding shares of the bank.
During an interview with CNBC’s “Fast Money, Halftime Report,” McGuire said BNY Mellon is the largest position of Marcato Capital for several months. According to him, his firm and other shareholders are frustrated because the bank is not achieving its potential.
McGuire said BNY Mellon’s underperformance is evident
McGuire said Marcato Capital engaged on an extensive dialogue with the board of directors of BNY Mellon and several shareholders regarding the need for a meaningful change in the leadership of the bank.
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The activist investor added that he sent a letter to BNY Mellon regarding its demand to find a replacement for its CEO Gerald Hassell.
Hassell assumed his position as CEO of BNY Mellon on September 2011. During the interview, Kate Kelly emphasized that the stock price of the bank doubled since Hassell assumed as CEO, and analyst gave him credit for cutting the bank’s expenses.
When asked why the bank needs a drastic change, McGuire said, “We do think that a change is necessary. I don’t think we’re actually alone in this regard. He explained that many of the key performance metrics of the company are not moving in the right direction.
McGuire pointed out that the bank’s expense levels are “growing at rates that are truly unsustainable,” which resulted to declines in margins, returns on equity and earnings per share under Hassell’s tenure.
BNY Mellon failed to reach its own goals, said McGuire
In his letter, McGuire said the shareholders of the company have serious concerns that the board and management do not share their sense of frustration and desire for a meaningful leadership change staring with its CEO. McGuire pointed out that Bank of New York Mellon continuously failed to achieve its long-range earnings target.
He added that the bank’s underperformance is noticeable across a broad range of its key performance measure including its headcount growth, expense levels and assets under custody growth and investment servicing revenue.
“This management has both failed to reach its own goals and failed to keep up with key performance indicators of the competition. While there are aspects of the external environment that have created headwinds for the company’s earnings power, competitors face similar challenges and yet are proving much more adept in navigating the marketplace,” wrote McGuire.
When Kelly asked regarding BNY Mellon’s ballooning head count, McGuire said the bank needs to dramatically reduce its number.
BNY Mellon’s response to Marcato
In response to the demand of Marcato Capital, a spokesman for BNY Mellon said,”We welcome input from all of our shareholders. Under Gerald Hassell’s leadership, BNY Mellon has continued to increase shareholder value, reduce costs, improve margins and streamline the organization, which our results clearly demonstrate.”
Over the past 52-weeks, the shares of BNY Mellon traded between $32.58 and $41.79 per share. The stock price of the company closed $39.19 per share, down by 1.51% on Tuesday. The bank gained 17% in stock value over the past year.