First Chicago's Thomas: Sparkplug For Rebound, or Just a Caretaker?
Richard L. Thomas, the newly named chairman and chief executive of First Chicago Corp., says his top priority will be to improve credit quality and increase profits.
He acknowledges the job won't be easy.
Nonperforming loans "may blip up" before they come down, he said in an interview.
Stability Is Sought
The board's selection of Mr. Thomas is seen as a vote for stability as the company proceeds with a painful restructuring.
Effective Jan. 1, Mr. Thomas, 60, will replace Barry F. Sullivan, who resigned two weeks ago.
A popular figure with employees and customers, Mr. Thomas joined First Chicago 33 years ago and has been its president since 1974.
Only a Stand-In?
Mr. Thomas will have to step down in five years under First Chicago's mandatory retirement rule. Analysts are divided over whether he will be a strong chief or a caretaker.
Some say he has the time and credibility to leave a lasting mark; others view him as a transitional figure paving the way for a younger leader.
"He adds stability and continuity to an organization that doesn't need more turmoil," said Henry C. Dickson, an analyst with Kemper Securities Group, Chicago.
"The question is whether Dick Thomas will stay the full five years or serve as an interim chairman," said Ronald I. Mandle, an analyst with Sanford C. Bernstein & Co., New York. "My guess is that he will step down before five years."
First Chicago watchers tout several executives in their forties as future CEO material. And former Manufacturers Hanover Corp. president Thomas S. Johnson, 50, has reportedly been considered for the chief executive spot.
A Productive Period
During Mr. Sullivan's sometimes-rocky 11-year tenure, First Chicago established itself as one of the nation's leading wholesale and international banking organizations.
But the company lacked focus, spreading itself thinly in many different markets. Nagging credit-quality problems and a poor profit record eventually forced it to reverse course. First Chicago trimmed its global operations, while expanding its middle-market, credit card and branch banking businesses.
For the last five years, Mr. Thomas has supervised the company's growth in consumer and middle-market banking. His appointment as CEO reflects "a choice of directors to stay with that course," said Adam Klauber, an analyst with Duff & Phelps, Chicago.
When Mr. Thomas takes command of First Chicago, the company will be in the final stages of a stiff cost-cutting program. Last July, officials unveiled a plan to trim the work-force by 6%, or 1,000 people, by yearend.
Meanwhile, First Chicago is reeling from loan quality problems, especially in its national commercial real estate and leveraged deal portfolios. Nonperforming assets equaled 5.42% of loans plus foreclosed property at the end of the third quarter.
"We have to reduce the drag of the credit burden on earnings," Mr. Thomas stressed.
Must Show Results Quickly
The new CEO will be under pressure to build profits rapidly and to raise First Chicago's stock price so it can begin buying community banks and thrifts again. The company's shares currently sell substantially below book value, making acquisitions prohibitively expensive.
Mr. Thomas must show results quickly, analysts say, or the shakeout now under way in Illinois banking will pass First Chicago by. The company has the strongest retail network in the fragmented Chicago market, with about 100 branches.
But several outsiders, including Bank of Montreal and the Dutch ABN Bank, have recently invaded the area.
"Right now is a key time for Chicago when some institution can really grab dominance," said Mr. Klauber of Duff & Phelps.