When regulators slapped PNC Financial Services Group Inc. this year over its accounting for three special-purpose vehicles - forcing a $155 million downward revision to last year's earnings - they made it clear that the competence of senior management was a critical concern.
Now, three months and five key hires after being put under regulatory supervision, PNC has made what many consider to be surprising progress in attracting new executives.
Are the moves enough for regulators? And what if anything does the fact that PNC was able to grab so many top executives so quickly say about its prospects, as well as the outlook for James Rohr, its chairman and chief executive officer?
Most observers say they are reserving final judgment until the release of an independent consultant's report on PNC's senior management and the company's structure, due this month. But many also say its efforts to hire outside executives go a long way toward restoring confidence.
"This is a major step in the right direction," said Gerard Cassidy, an analyst with Royal Bank of Canada's RBC Capital Markets who has been an outspoken critic of PNC's management.
PNC started making moves this summer but picked up the pace dramatically in the past three weeks with three more additions, including a lawyer from Citigroup Inc. and the former head of HomeSide Inc.
Bringing in new blood at the top is "precisely what shareholders have wanted to see," said Thomas McCandless, an analyst with Keefe, Bruyette & Woods Inc. And that PNC has successfully courted executives from leading financial services firms signals that it is a fundamentally sound company that will emerge from its troubles, he said.
"Who would join a sinking ship?" Mr. McCandless asked. "Part of the reason you can get credible executives is that they want to be part of a strong institution."
All the recent appointments must meet regulatory approval, but several observers said they would be shocked if PNC had not received at least "a nod" from the consultants and regulators to announce the moves.
Mr. Cassidy said he believes the outside consultants have already done their analysis and recommended how to fix the problems. Mr. McCandless agreed, saying that PNC has already implemented many of the changes that regulators wanted to see.
The report "is to assess independently whether or not all the changes have been made and whether or not management is capable of executing" everything they said they would do, Mr. McCandless said. The report "may be disappointing to some investors who are expecting a head to roll or something."
The new management lineup includes Deborah Hope-Wedgeworth, the former chief counsel of global compliance at Citigroup, who on Sept. 24 was named chief compliance officer; Joseph Whiteside, the former head of HomeSide and veteran turnaround artist, who was tapped as a vice chairman Oct. 1; and Stephen G. Thieke, a former risk management executive at J.P. Morgan, who on Tuesday was appointed a director of PNC Financial and PNC Bank.
During the summer PNC hired John J. Wixted Jr., a former executive at the Federal Reserve Bank of Chicago, as chief regulatory officer and William S. Demchak, the former head of structured finance and credit at J.P. Morgan Chase, as chief financial officer.
It also promoted regional banking operations head Joseph C. Guyaux to president, a title that had been held by chief executive James E. Rohr.
The new arrivals have been accompanied by several high-profile departures. On Aug. 14 vice chairman Walter E. Gregg announced his retirement, and Robert L. Haunschild resigned as CFO in late August. Both exits were widely seen as sacrifices for the greater cause.
Mr. Rohr has survived as chairman and CEO despite tremendous outside pressure for him to leave.
Mr. Cassidy was one such voice but says he has now accepted that Mr. Rohr will remain in the company - and even sees some upside to it. "He made it through the firestorm," Mr. Cassidy said. "Two out of the three scalps were enough."
Having stared down the naysayers and won, Mr. Rohr should be focused more than ever on creating shareholder value, either through improved performance or more drastic measures, Mr. Cassidy said. "If the markets don't allow him to deliver, he may be more inclined to sell the company than he would have before this whole debacle."
Some are still skeptical, however. Frank Barkocy, the director of research at Keefe Managers Inc., said, "PNC is in a show-me situation now with the investors. You've got the new people in. Now let's see what they're all about."
Jennifer A. Thompson, an analyst at National Bank of Canada's Putnam Lovell Securities Inc., said that hiring the new executives is "a positive" because it brings in "fresh eyes," but it does not solve all of PNC's problems. "They still have an uphill battle," she said.
In addition, Ms. Thompson said that Mr. Rohr's continued presence at PNC "concerns me - I'm still not convinced that there won't be more change" at the top.
