Investors expect a change in management style at First Union Corp. as G. Kennedy Thompson succeeds Edward E. Crutchfield, who on Friday stepped down for health reasons as chief executive officer of the No. 6 U.S. banking company.
Mr. Thompson, 48, is known as a solid banker with a penchant for analysis and a hands-on approach to management - a marked contrast to that of Mr. Crutchfield, 58, who was known to some as "Fast Eddie" for his flashy style and many acquisitions.
"Mr. Thompson is much more focused on the numbers," said Thomas K. Brown, who heads a money management firm, Second Curve Capital, and who has been a sharp critic of Mr. Crutchfield's "dilutive" acquisitions. Mr. Brown said Mr. Thompson "is very optimistic. Ed Crutchfield had become much more battle-scarred and more defensive in his later years."
Mr. Thompson has won plaudits for boosting employee morale and improving customer service - and the company's earnings - since he was named president last fall.
Still, he is stepping into the very large shoes.
Mr. Crutchfield, 59, has built First Union into a hulking $253 billion-asset banking company, from $7 billion when he took over in 1984. Mr. Crutchfield, who will retain his position as chairman of the board, stepped down as CEO effective April 18, announcing that he has lymphoma, a curable form of cancer.
But shares rose $1.6875, or 5.63%, to $31.6875 on the news of Mr. Thompson's promotion.
"It is a very unfortunate circumstance, but this could be one step toward the market's having an improved perception of First Union," said Christopher Marinac of Robinson-Humphrey Co. in Atlanta. "The story for the last few months has been that the bank is turning things around, and there have been signs of that, but there are certain investors who remain negative toward the company because of Ed Crutchfield."
Mr. Crutchfield's acquisition strategy started going awry last year, when the company had to lower earnings goals several times because of trouble integrating CoreStates Financial and Money Store. Even after a recent rebound, shares today are 51.5% lower than at the beginning of 1999.
A 25-year company veteran who helped build up the Charlotte, N.C. bank's capital markets division, Mr. Thompson is "taking the right steps to improve the longer-term outlook of the company,'' said Michael Plodwick, an analyst at Lehman Brothers Inc.
Mr. Plodwick upgraded First Union stock after meeting with Mr. Thompson two weeks ago, citing Mr. Thompson's program of town meetings with employees and senior management and his focus on cross-selling. Mr. Plodwick also said Thompson has strengthened the budget process and has put in a system that detects problems much more quickly than the previous system did.
Mr. Thompson said in a March 20 conference call sponsored by Credit Suisse First Boston he was committed to a multifaceted strategy incorporating investment banking, asset management, and commercial banking. "We just believe that that model is right for our company and is the best model to grow earnings over time in good and bad economies," he said.
He also suggested that First Union may resume acquisitions, though not on the scale practiced by Mr. Crutchfield. "We might buy more mutual funds. We might make some small acquisitions in the insurance business. But really these would be just niche items that would add to our product line in the securities business."
Some had wondered whether First Union's plummeting share price last year, after several profit warnings, would make it a target. But that talk has subsided.
"I doubt this would put First Union in play," Sean Ryan, who heads research firm Byrne, Ryan & Co. in White Plains, N.Y., said of the changing of the guard. "First Union is an outstanding franchise whose shareholder value got squandered by overpriced acquisitions and misbegotten technology issues. A change at the helm holds out the prospect of getting that corrected. So if anything, it enhances their ability to maintain their independence."
Steering the company out of its troubled past will not be easy, some analysts said.
Mr. Thompson "lacks strong retail banking experience, and one of the biggest issues that the company is facing is on the retail side," Mr. Ryan said.
Mr. Crutchfield's departure shocked the banking industry and prompted testimonials from competitors and analysts who had clashed with him.
"This is sad news," said Hugh McColl, the chief executive officer of Bank of America Corp. in Charlotte. "But Ed always has been a fighter, and he'll fight this battle as well. While Ed and I have been fierce competitors in business, and he's built a great company, we also have become good friends in our shared efforts to make Charlotte a stronger community. I look forward to continuing to that work and our relationship."
Mr. Brown said: "I am saddened by this. We realize this is a serious form of cancer and hope that he is a true warrior and is able to conquer this."