In firing its chairman and chief executive officer Sunday night and elevating one of his top deputies to the posts, Metris Cos. Inc.'s board of directors replaced a marketing expert with a credit expert.
In its second management shakeup in as many months, Metris dismissed Ronald N. Zebeck, a seasoned card marketer who led the company's 1996 spinoff from Fingerhut Cos. Vice chairman David D. Wesselink, a former chief financial officer at Advanta Corp. and at a Household International subsidiary, was appointed to succeed him.
Last month Metris, whose credit-granting practices have come under regulatory scrutiny this year, promoted John Witham to chief financial officer and shifted Benson Woo, the previous CFO, to a business development job.
Analysts said Mr. Zebeck's departure was expected, given Metris' troubles this year. In April the company announced that it had entered into an agreement with bank regulators to improve its credit risk management, lower its maximum credit lines, and deliver written action plans regarding its strategic and capital plan, among other things.
Sunday's shake-up ended Mr. Zebeck's involvement with the company he had founded. It also put control of Metris in the hands of his longtime second-in-command. Mr. Wesselink came to the company in December 1998 after five years at Advanta, where Mr. Zebeck also had worked, and before that spent 22 years at Household Finance Corp.
"In making this change, the board expressed to me its confidence in the company's management team," Mr. Wesselink said in a press release. A Metris spokesman said that Mr. Wesselink was not available for comment, because he was spending time with employees.
The fate of Mr. Zebeck, who had been a member of MasterCard International's board of directors, recalled that of Shailesh J. Mehta, the founder and former head of Providian Financial Corp., who had been on Visa's board before similar problems forced him to quit.
Mr. Mehta was succeeded by an executive with solid lending credentials, Joseph W. Saunders, who joined Providian after running credit card units at FleetBoston Financial Corp. and at Household. He brought with him a top deputy, Warren Wilcox.
The upper echelons of the credit card industry are quite small: While they were at Household, Mr. Saunders and Mr. Wilcox worked closely with Mr. Zebeck, who had been hired by General Motors Corp. in 1991 to develop the marketing plan for the landmark GM MasterCard, which Household issues.
Earlier in his career, Mr. Zebeck had led the marketing department at Advanta.
He has always had an outgoing personality. A press release announcing the GM card included a picture of a newly issued metallic card. The cardholder: Ronald N. Zebeck. "The card really looks great," he joked at the September 1992 press conference. The card racked up one million accounts within a month, the fastest rate ever.
A year later he left GM abruptly, reportedly because he was unhappy about its unwillingness to diversify into other financial services. Five months later, in April 1994, Fingerhut hired him to run its financial services arm. He used Fingerhut's customer list to build a $1 billion credit card portfolio within two years.
Metris continued to grow, but surging chargeoff rates eroded profits until they disappeared altogether. The company posted a $36.4 million loss in second quarter and a $1.3 million loss in the third quarter, while its chargeoff rate rose to 15.1%.
Ratings agencies have downgraded the company. E. Reilly Tierney, an analyst at Swiss Reinsurance Co.'s Fox-Pitt, Kelton Inc., says chargeoffs in its Master Trust, which make up 93% of its receivables, are set to surpass 20% by early next year.
Irving J. Levin, a former subprime card banker who is now the chief executive officer of Genesis Financial Solutions Inc., a Portland, Ore., firm that buys and collects charged-off debt, said Mr. Zebeck was so closely aligned with Metris that he became the natural fall guy when the company stumbled. "When a baseball team is doing badly you shoot the manager, and that is what they did."
"I think the board of directors has been pretty patient waiting for a turnaround that hasn't happened," he said.
One industry insider who has spoken to Mr. Wesselink says the new Metris head may be planning to retire soon and may hold the job only long enough for the board to find a successor.
Mr. Tierney theorized that the ongoing losses forced the board to oust Mr. Zebeck, a hard-charging marketing pro.
"Some guys are obviously better suited to be builders and growers of companies rather than turnaround guys, and the board concluded that Metris needed a fresh start, because they clearly have some heavy work cut out for them in 2003," Mr. Tierney said in an interview. "If there were any accounting issues or regulatory issues to be worried about, Mr. Wesselink almost certainly would be going, too. Dave is a solid hand and has been around for a long time. We are glad he will be running the show."
