How Ellen Alemany is reinventing CIT
Certainly there were cushier gigs available.
So Ellen Alemany coming out of her retirement — with its tennis matches, Pilates classes and plum appointments on corporate boards — to oversee the turnaround of CIT Group grabbed attention across the industry.
Its shareholder returns had sunk, following a controversial acquisition that catapulted CIT over the $50 billion-asset threshold for systemically important financial institutions, and some investors were calling for the company to break up.
It's not as if Alemany — one of only a handful of women to have run a big bank — had a higher rung to climb on the corporate ladder either.
But living life at a more leisurely pace had become boring two years on, Alemany said in a recent interview. So when she heard Wall Street icon John Thain planned to retire as chairman and chief executive of CIT, she wanted to explore the possibilities.
"I said to my husband and children, 'Gee, what do you think of me raising my hand?' " Alemany said.
They all urged her on. "My children were like, 'Mom, you're much happier working,' " she recalled, laughing.
In returning to banking, she is setting a major challenge for herself — molding a commercial finance company with a spotty history into a profitable, middle-market bank.
But that is exactly why she signed on.
"I said, 'Wow, this is an Ellen project,' " she said.
Alemany's first 18 months have been filled with a near-constant string of battles. CIT investors even doubted her ability to handle the job at first.
Shortly before the CEO title officially got passed to her in April 2016, Alemany — previously a CIT board member — outlined an ambitious turnaround plan during a conference call with analysts. The plan called for hitting a 10% return on tangible common equity by the end of 2018, mostly through a mix of portfolio sales and cost cuts. CIT had just a 7% return at the time.
After the call, CIT's stock fell 3%.
But Alemany has silenced her skeptics — at least for now — by methodically delivering on what analysts say, for other CEOs, would be almost insurmountable challenges. She negotiated the sale of a $10 billion-asset aircraft leasing business within six months of taking the helm. She also secured approval from the Federal Reserve for a subsequent $3 billion capital return.
"To her credit, she laid out a broad vision, and then set about achieving it," said Vince Caintic, an analyst with Stephens. "She has achieved a lot within a short period of time."
For Alemany, being seen as a corporate fixer is something of a shift. She wasn't a household name in banking when she retired in 2013, as the chairman and CEO of Citizens Financial Group, a unit of the Royal Bank of Scotland at the time. In fact, when she was tapped to run CIT, many investors were unfamiliar with her track record.
RBS brought Alemany on board in 2007 to integrate its U.S. corporate and retail divisions, and also to build out its middle-market banking business. The idea was to get the two separate groups working together more seamlessly.
But when the mortgage meltdown hit in 2008, her role changed. Alemany began to focus instead on leading Citizens out of the depths of the crisis, even as its parent company struggled.
With Citizens being a foreign-owned bank subsidiary, Alemany got less public attention than other CEOs in the industry. Though profitability dragged during her tenure, her achievements in other important areas, such as putting in place badly needed credit-risk controls, largely went unrecognized, according to Brian Klock, an analyst at Keefe, Bruyette & Woods.
"She won't get a lot of credit for that, because she left before Citizens went public," said Klock. RBS spun off Citizens, based in Providence, R.I., in 2014.
Questions about why Alemany retired in the first place still linger in the industry. She was 57 when she stepped down — a young CEO by most standards — and appeared to be at the top of her game.
"I wasn't having fun anymore," Alemany said, in her characteristic, soft-spoken monotone. "I was commuting to Rhode Island [from New York] for six years, and did not want to move my family. I've always been a person who has followed my gut, and my gut said, 'It's time.' "
Questions about why Alemany retired in the first place, at age 57, still linger in the industry. 'I wasn't having fun anymore,' she says.
At CIT, Alemany has the opportunity to leave behind an even bigger legacy — as one of only two women to have run a U.S. systemically important bank and, perhaps, as one of the industry's most effective turnaround artists.
Alemany said she has found her ideal job in sorting through CIT's thicket of challenges.
"What I'm really good at is understanding a company, and then figuring out, what's the strategy that I need to execute? And how do we transform the company?" Alemany said. "I just didn't think I was going to be doing this again — seriously."
To say CIT is in the midst of a turnaround is something of an understatement.
Alemany inherited a company with a hodgepodge of businesses, from small-business lending to international railcar leasing.
Its internal problems range from faulty accounting to issues with its corporate culture. Some of those issues stemmed from the complex integration of OneWest — the Pasadena, Calif., bank CIT acquired in August 2015 — which took longer and proved more cumbersome than expected. It was through the OneWest deal that CIT also inherited Financial Freedom, a reverse-mortgage unit that has caused headaches. CIT this year agreed to pay $89 million to settle charges from the Department of Justice regarding improper reimbursement for a government insurance program.
In taking charge of CIT, Alemany has worked to simplify the company, ditching several of its international divisions, and making lending and deposit-gathering the central focus.
It's a change in strategy from her predecessor, Thain, who led CIT out of bankruptcy after the crisis and had ambitions to grow it into a much larger company.
There are signs that Alemany's approach is producing results. The company's highly watched return on equity is on the upswing. Investors, meanwhile, have begun to turn their attention to core operations.
But one hurdle to achieving her 10% return-on-equity target is that CIT is still sitting on a mound of excess capital, estimated at around $1 billion. Efforts to grow deposits — and lower the company's funding costs — also have been slow to materialize.
Alemany's colleagues say that, in some ways, leading CIT at such a dicey moment is a role almost customized for her. She had been a commercial banking executive at Citigroup, where she started in 1987. As she moved up the ranks, she excelled at the messy art of corporate integrations and divestitures. She even oversaw key parts of Citi's integration of Travelers, the insurance giant it bought in 1998.
At various points in her two decades at Citi, Alemany also ran some of the same types of businesses that CIT deals in, including middle-market lending and equipment leasing.
That experience is valuable now.
"She has a grass-roots grasp of what those businesses are, how they work, what the risks are, the financial profiles ... and which ones are better than others," said Alan MacDonald, chief client officer in the corporate bank at Citi, and one of Alemany's former bosses. "She is pretty much perfect for the job."
Alemany grew up in the Bronx, N.Y., where her parents, first-generation Italian-Americans, ran a liquor store on Arthur Avenue, in a section of the borough known as Little Italy.
During the busy holiday season, Alemany would pitch in at the store.
"I always had a natural curiosity — I loved the business," Alemany said. "I would wrap bottles during the holidays, and I would ask my father a lot of questions about the business model: Did you make more money selling wine or liquor? How did you determine the price on it?"
Alemany attended the University of Bridgeport, where she majored in English literature. Uncertain of what she wanted to do after college, she considered law school, and got a job in the legal department at IBM.
The technology giant was in the midst of a big antitrust case at the time, and Alemany put in long hours at the office. The experience soured her on a legal career. "It was just all paperwork," she said.
Around that time, Chase Manhattan — now JPMorgan Chase — was recruiting liberal arts graduates to work on process engineering. Alemany got hired there in 1977, and was assigned to the documentary collections department, where she was in charge of automating and redesigning the work flow.
The banking business suited her. Looking to move up in the field, Alemany applied to Chase's credit-training program, on the suggestion of her boss. She also began working toward her MBA at night.
She parlayed her additional training into a job as a tech lender at Chase, during the computer boom of the 1980s. Among the companies assigned to her were Macom, an early leader in telecommunications, and Data General, a scientific computer company that, through acquisitions, is now part of Dell.
As Alemany's career in banking was beginning to take off, however, her personal life took a devastating turn.
Her oldest child, Ellen, suffered severe brain damage in the womb, and was born in 1985 with cerebral palsy.
"I just say that everyone has their own cross that they bear, in a sense," Alemany said. "For us, it was all about turning that energy into positive energy for developing Ellen. You go through all of the stages — why us? — to being really sad about it, and then putting all of that energy into creating who she is today."
Alemany's doctors at the time suggested putting her daughter in an early-infant stimulation program — one that required parental participation in sessions that took place a couple of mornings per week.
Both Alemany and her husband were launching their careers, and found it hard to balance their family life with their demanding work schedules. Her husband, an attorney, was working at the Securities and Exchange Commission.
The stress was a big factor in her decision to leave Chase in 1987. One of her former bosses had accepted a job with Citi, in an office that was only four miles from Alemany's Westchester, N.Y., home. He offered her a job with all of the flexibility she would need to attend to her daughter.
"At that time, companies didn't really talk about work-life balance — they didn't talk about these types of things," Alemany said. "So I resigned from Chase, and people were really surprised that I was leaving, but I explained that I was doing it for personal reasons."
Looking back, Alemany said Chase would have likely accommodated her schedule, if she would have asked. "I was too afraid to talk about it," she said.
Coping with her young daughter's diagnosis and developmental issues made Alemany — and her family — more resilient and empathetic. "These are values and behaviors that I show to my employees today," Alemany said.
Her daughter Ellen, now 32, lives in a residential home for people with developmental disabilities. Alemany has two other children: Jackie, 25, who works as a reporter for CBS in Washington, D.C.; and David, 22, a recent college graduate who works at KPMG.
Alemany found her professional stride at Citi. An early assignment, overseeing the restructuring of News Corp, put her on the executive track — a path that, years later, led to Citi's operating committee.
Of her various roles at the New York megabank, the one as CEO of CitiCapital, in particular, helped prepare her for the CIT job, Alemany said.
She took over as head of CitiCapital in 2001, after returning to New York from running the corporate bank in Western Europe. CitiCapital was losing money at the time, and was structured as a mishmash of leasing businesses that Citi had inherited through its early-2000s acquisition spree.
For instance, Citi in 2000 bought Associates First Capital Corp., one of the nation's largest financing companies at the time. The same year, it also bought Copelco Capital, a small-ticket leasing business, and ended up with another leasing business through its acquisition of Schroders, a U.K. investment bank.
"Every person I spoke to said, 'Good news, Ellen, it can't get any worse.' "
But now Alemany describes the job as one of her favorites in her career because it played to her strengths.
"I sat down and put a strategy in place," she said. "How does the business fit with the bank? Which business are we going to keep, and which are we going to fix? How are we going to organize the businesses? And how are we going to organize the infrastructure in the back office around the businesses?"
Alemany brought in a new management team, and began making decisions about which businesses to grow and which ones to sell.
Those who know Alemany say she offers employees and investors a crystal-clear message of what she expects — but without the rousing speeches common with some of her fellow big-bank CEOs.
She smiled as she told a story about how she prepared to divest a transportation business that leased 18-wheel trucks. She had hired a woman in the company's Las Colinas, Texas, office to help sell off the inventory.
The woman's philosophy? "Pretty sells," Alemany said.
Together, they arranged for the cleanup of the trucks, repaved the trucking office's parking lot and even put in new white parking lines. Once weekly auctions began, the trucks sold quickly.
Alemany — who even got to drive one of 18-wheelers — oversaw the sale of the transportation business to GE Capital, which later became part of the Bank of Montreal. Some of CitiCapital's other leasing businesses, coincidentally, were also sold to CIT.
"There was a lot of satisfaction, putting this strategy in place, executing against it, and watching the business turn," she said.
With her return to the industry, Alemany is more at ease.
"I think that, like anybody, time has made her stronger," said Denise Menelly, head of technology and operations at CIT, who also worked with Alemany at both Citi and RBS.
Alemany cuts a peculiar profile in the industry. She leads with a quiet sense of confidence.
Those who know her say she offers employees and investors a crystal-clear message of what she expects — but without the rousing speeches common with some of her fellow big-bank CEOs.
"With a lot of CEOs, you sit and listen to them, and you just want to go out there and crush the world they're so inspirational," Klock said. "That's not her style. Ellen is very quiet, but she'll tell you the way it is."
After 40 years in the banking business, though, Alemany knows how to navigate the regulatory circuit and is well respected. In an industry based on relationships, she has forged the type of professional friendships that make CEOs successful.
Some analysts, for instance, attribute the Fed's approval of CIT's $3 billion capital return — a large sum for a midsize bank — to the fact that regulators, who have a long history of working with Alemany, trust her ability to execute.
"It's impressive the kind of folks she can pick up the phone and have access to," Menelly said. " 'Oh, Ellen, you're out of retirement. What can I do to help?' "
Alemany is having more fun this time around. "It's a combination of factors," she said. "It's the autonomy, which is wonderful. It's building a wonderful team of people that I respect. It's building and watching the results."
But even if she achieves her goal of 10% ROE by the end of 2018, analysts say CIT could be an acquisition target.
Alemany insists CIT is not for sale, though public companies rarely advertise that they're open to the possibility, until the right bidder comes along with the right price, Caintic said.
In the meantime, the long process of boosting profitability continues.
"CIT has gone through so much turmoil," Caintic said. "If this business can be stabilized as a middle-market bank, as a good bank that's safe, then that's quite an accomplishment."