After five years of nearly constant restructuring, KeyCorp revamped the very top of its organization on Thursday, naming as its new chief executive the man who has headed its latest profit-improvement initiative.
Robert W. Gillespie, chairman and chief executive officer since 1995, announced that he plans to retire Feb. 1 as CEO and in mid-May as chairman in mid-May. His successor will be Henry L. Meyer 3d, president, who recently concluded a companywide operations review.
In an interview, Mr. Meyer was at pains to show there was no connection between Mr. Gillespie's decision and the Cleveland company's performance. "Bob put me in charge" of the latest restructuring, Mr. Meyer said. "The stock has come back. It was just a good time to change leadership."
But outsiders read the naming of Mr. Meyer as chief executive as an attempt to demonstrate that KeyCorp's restructuring will be different from previous ones.
"The company wants to change its image, which is a poor image on Wall Street," said Peter Winter, director of CIBC World Markets. "They constantly overpromise and underdeliver."
Analysts who follow KeyCorp said appointing Mr. Meyer is a good move. The 51-year-old is in charge of its "perform, excel, and grow," or Peg, restructuring plan.
Beside the job cuts, KeyCorp hale its business units, from 22 to 11, and fold them into more centralized divisions. The company is changing its incentive compensation package for managers and those who head business units. Senior managers who do not meet business objectives will get smaller pay increases.
Analysts said Mr. Meyer has been taking on a higher profile lately. "Henry Meyer has become more instrumental in running the company," said Kate Blecher, an analyst with Sandler O'Neill. "He is becoming much more visible. I think the transition will be smooth."
Mr. Meyer said he will concentrate on implementing initiatives that will cut costs and enhance revenue. More than 40% of the ideas generated by employees in the restructuring program have been put to use. "We are going to focus on executing against the plan," Mr. Meyer said. "We think there is more untapped value in KeyCorp. Our shareholders will reap the benefit."
Overseeing the Peg program is an exciting opportunity, Mr. Meyer said. "This is not a fad diet," he said. "This represents a cultural change. We have concrete, specific implementation ideas. If Key can continue to say on track or ahead of track, we will be creating shareholder value."
Mr. Gillespie, 56, who has spent his entire career with Key, said: "With our strategic direction clearly defined and the potential for improved financial performance strengthened as a result of our successful competitiveness initiative, this was an obvious and opportune time to complete the transition. I am retiring as CEO knowing that we have an outstanding leader."
His departure comes amidst a major restructuring that calls for a 10% cut in its work force. In September, the company announced it was eliminating 2,300 jobs as part of a plan at reviving profits and cutting $360 million of annual expenses.
Earlier this week, KeyCorp said non-performing loans rose nearly 10% from the third quarter, to $650 million. The company's struggle for growth continued as its fee income fell 24% from a year earlier, to $508 million. Fees from investment banking also declined 15%, to $94 million.
Mr. Gillespie has presided over several efficiency initiatives during his tenure, in 1995, 1996, and 1999, all of which yielded little in the way of positive long-term earnings growth. Key eliminated 2,700 jobs in 1996 by consolidating 12 bank charters into one and selling 280 branches. In 1995, the company announced it was repositioning its businesses, divesting itself of a $25 billion mortgage servicing business, and selling 24 branches.
In 1999 he told analysts that he would consider selling the company if a restructuring going on that year failed to produce stronger earnings.
Mr. Gillespie, who oversaw several asset management, investment banking, and brokerage firm acquisitions at KeyCorp, said he is pleased with Mr. Meyer's experience with the Peg program.