Before he became the chief executive of U.S. Bancorp, Richard K. Davis was like an able offensive coordinator for a team with a killer defense.
He helped the franchise expand and saw the potential to go on the attack. But the head coach and the competitive dynamics at the time called for putting basic blocking and tackling ahead of more aggressive aspirations.
"No one ever scored on us," Davis told American Banker, "but a zero-zero tie isn't an exciting outcome."
The game has gotten more interesting since Davis, who replaced the legendary Jerry Grundhofer as CEO in December 2006 and became chairman in December 2007, started giving the old playbook a new dimension. And this year, Davis, the former teller from Los Angeles who rose through the ranks and got drafted by Grundhofer in 1993 to help him run a U.S. Bancorp predecessor company, has racked up some decisive wins.
The Minneapolis company solidified its presence in California, Chicago and other markets where it has swooped in with savvy deals to build out its branch network. It launched a municipal underwriting group as part of its corporate banking expansion, attracted commercial banking talent and introduced products stemming from investments in mobile banking and remote deposit capture technology.
For running a strong offense while remaining a diligent steward of the conservative credit culture and efficient operating model that has long defined U.S. Bancorp, American Banker has selected Davis as the Banker of the Year for 2010.
Davis' ability to balance ardor and prudence has extended to his involvement in industry advocacy, which intensified with his appointment as this year's chairman of the Financial Services Roundtable lobbying group.
Davis was a vocal critic of Congress this year as it grappled with financial regulation reform. But he also has found common ground with Elizabeth Warren, the architect of the new Consumer Financial Protection Bureau.
In October he opened a dialogue with her on behalf of the roundtable, and said he is supportive of her focus on establishing new standards of disclosure and transparency.
Now that the details of reform are in the hands of the regulators, Davis said it's time for bankers to move beyond the fears and theatrics that accompanied the political debate.
"The industry is clearly responsible for a lot of the things that happened," he said. "Let's not challenge that. Let's get back to being relevant."
To U.S. Bancorp, that means continuing the work that began three years ago when it first telegraphed an intention to invest in the company's growth.
In a meeting with investors in September 2007, executives promised customer service improvements, a minimum 20% return on equity and a 10% increase in earnings per share over the long term. When financial panic paralyzed the markets a year later, U.S. Bancorp's management had to determine, as Davis described it, "whether we would have the courage to finish what we started." It took one meeting to decide. "It wasn't a debate," Davis recalled. "Everyone was all in."
Since then, U.S. Bancorp has made acquisitions across its consumer banking, wholesale banking, trust and payments businesses. It has upgraded its call centers, mortgage origination systems, Internet banking capabilities and branch hardware and software.
The expenditures were a break from the era when U.S. Bancorp was strictly known as a lean operator with a no-frills mentality and a single-minded obsession with shareholder value.
"The whole efficiency-ratio and what-did-you-sell-today focus was Jerry Grundhofer," said longtime industry consultant Jim Eckenrode, research executive for banking at TowerGroup. "They've tried to make themselves a little more accessible, and they've invested in technology as well as in the front office, which they hadn't done for a long period of time."
U.S. Bancorp still has the best efficiency ratio within its peer group, but it loosened the corporate purse strings to boost capital spending by nearly 50% in 2009, and by at least another 10% this year.
Though Davis spent years working for Grundhofer and developed his own disciplined approach to business, his willingness to invest in the company comes as no surprise to longtime colleagues."I always saw it, that the things that [Davis] is most focused on are growth issues, but he had to do it in an environment where the focus was on expense management," said Joseph Otting, formerly U.S. Bancorp's vice chairman for commercial banking and now the CEO of OneWest Bank.
By sidestepping many of the problems that tripped up competitors early in the financial crisis, Davis was able to start executing his growth strategy at a relatively reasonable price.
He picked up assets from failed banks in California, a market in which he had long desired to expand, while the turmoil in investment banking allowed him to quickly staff U.S. Bancorp's new trading desks with experienced capital markets hands.
Dick Payne, U.S. Bancorp's vice chairman for corporate banking, said Davis "had the vision to see that it was the right time, that it was a perishable opportunity and that if we didn't take advantage of it right now, it would just cost us more later."
If the capital markets business appears to be an odd fit for Davis, an affable and unassuming man who frequently espouses the virtues of plain-vanilla banking, he doesn't see it that way.
"Capital markets shouldn't be a four-letter word," Davis said. U.S. Bancorp decided to start arranging high-grade bond sales and the like "to finish doing for our customers what we were outsourcing" to other companies. It does "no dabbling overseas, and no proprietary risk-taking," he said.
For all the investments U.S. Bancorp is making, there is none that Davis is more passionate about than the investment being made in employees.
He considers employee engagement a cornerstone of good customer service, which in turn he sees leading to good things for shareholders. Those connections weren't routinely recognized in the past.
Before, Davis said, U.S. Bancorp's branch managers "wouldn't spend money on a retirement party" for departing employees. "You add back those small things and it's like an act of heroism."
Banking goodwill with employees doesn't always have to mean sacrificing something from the bottom line.
In June, when U.S. Bancorp held a board meeting in New York, Davis brought the directors and the company's management committee to visit the corporate banking group's new trading floor. Some of the capital markets veterans in the group, the ones who had rarely, if ever, seen a CEO wander a trading floor, took great comfort in the gesture, Payne said.
Davis is "quick to follow up with a call to someone who has done a meaningful transaction in the bank, and quick to call a customer who has chosen us for a transaction," Payne said.
That hands-on approach, he said, forces everyone around Davis to become better managers, with more detailed knowledge of the business lines they oversee, "because you know you're likely to be asked a question that you'd better be able to answer."
As hard as Davis works at accumulating information about the company, he said he works equally hard to make sure that the information gets shared with his management team. At 52, Davis has no immediate plans to leave U.S. Bancorp.
But if that were to change, Davis said, the board knows "exactly what I'd recommend" in terms of a replacement and would have little reason to worry about maintaining a sense of continuity. "I would want one of my best legacies to be that I didn't hold anything to myself informationwise," he said.
Davis also is proud of his record as a working parent. He estimates he made 80% of the ball games and parent-teacher conferences that came up as he and Theresa, his high school sweetheart and wife of 32 years, raised their three children. The Davises enjoy doting on their young grandson now that their children are grown. None of them went into banking.
In the aftermath of the industry's greatest upheaval since the Great Depression, Davis is firmly in the vanguard of executives who will be relied upon to help steer the banking business through the reform and retrenchment of the financial system.
Accompanying him are fellow CEOs including Jamie Dimon of JPMorgan Chase & Co., American Banker's Banker of the Year for 2009, John Stumpf at Wells Fargo & Co. and Robert Kelly of Bank of New York Mellon Corp., whom Davis counts among his closest friends in the industry.
"I think most CEOs probably have a small group of peers they rely on," Davis said. "But after that, we're competitors."
Davis has competed on just about every level of banking there is, from the branches where he worked while majoring in economics at night school, to the upstart Midwestern banks where he studied the art of dealmaking and acquisition integration, and now, at the helm of a $283 billion-asset company with enough heft to rank as the fifth-largest U.S. commercial bank and enough room to grow before brushing up against the $1 trillion-plus banks that make up the top four.
Andy Cecere, U.S. Bancorp's chief financial officer, said Wall Street has come around to Davis' way of seeing things, despite some initial skepticism about whether the company could parlay its historic strength as a solid operator into success on the growth front.
"There was some uncertainty as to our ability to do that, but fast-forward three years later," Cecere said. "Not only have we made the investments and done the deals, but we've actually grown and improved as a result of them. Each and every quarter, the analysts believe more and more."
U.S. Bancorp has not yet met all the goals it laid out three years ago. Return on equity is at a normalized rate of 17% to 19%, below the 20% initially projected. Long-term earnings-per-share growth is shaping up to be 1 or 2 percentage points below the 10% range that the company had hoped for.
New regulatory burdens will put additional pressure on the numbers, though Davis said the passage of financial reforms would not alter his strategy. "There's nothing I would change," he said, "but it will take longer to get there."
The continuing economic impact of stubbornly high unemployment also might keep ambitions in check at U.S. Bancorp and around the industry.
But this is not time for bankers to cower, Davis argued.
Striking a tone somewhere between that of friendly encouragement and an industrywide call to arms, he said: "There will be a recovery. Let's start acting like it."
On that, he has led the industry this year by one example after the next.
