Barely a year into a high-profile turnaround, Riggs National Corp. president and chief executive Paul Homan resigned Monday, sending the bank's stock plunging amid concern about the company's future.
Market watchers were stunned by the news that Mr. Homan, who has a record of fixing banks and selling them, had voluntarily left 11 months to the day after he signed on at the troubled company.
Word of the resignation triggered hearvy trading as shares of the $4.8 billion-asset bank company plunged $1.75 a share, ending the day at $7.75.
Bursting the Bubble
Analysts said the plunge was the market's way of deflating Rigg's share price after the boost that Mr. Homan, a respected former regular, had given it last summer.
"Fundamentally, the stock had priced because of the optimism about Paul Homan's past banking analyst at Washington, D.C.-based Johnston, Lemon & Co. "He was personally a big part of that price."
During Mr. Homan's brief tenure, Riggs raised $132.3 million of fresh capital, got its nearly fatal credit-quality problems under control, and began a campaign to revamp its 62-branch network in the District of Columbia area. The company also began a campaign to slash its abysmal 90% efficiency ratio.
Mr. Homan brought to Riggs a good working relationship with regulators and recent success in repairing First Florida Banks, Tampa, which was later sold at a premium to Barnett Banks Inc.
Signal of Independence
Many observers hoped Mr. Homan would do the same for Riggs. However, investors and analyst said his departure signaled that a long-time Riggs chairman Joe. L. Allbritton wants to keep Riggs independent.
"I think it was a bucket of cold water that woke everybody up," said an institutional investor who asked not to be identified. "Many people had thought that Paul Homan could change that."
A spokesman at Riggs declined to comment.
In a statement, Mr. Allbritton praised Mr. Hoffman's contribution, noting that the bank's capital levels are the healthiest ever and that Riggs has posted three recent quarters of core profitability. "Our focus is now is on using our enhanced capabilities to take adavtange of Riggs' position in the Washington, D.C., marketplace," he said.
The resignation came as Riggs faces unprecedented competition from superregionals such as NationsBank Corp. and First Union Corp. in a market already crowded with credit unions, nonbanks, and suburban banks.
The company's executive committee is to meet Wednesday to begin the search for a new president. Richard at home, Mr. Homan declined to comment, except to say that he would resume consulting.
In a related matter, the bank disclosed that George W. Grosz, executive vice president of Riggs' Financial Ser2vices Group, had recently resigned to become president and chief executive of Meridian Bancorp's asset management subsidiary.
Impact on Oversight?
It was unclear whether the senior management changes would affect the bank's effort to end regulatory oversight this year, as Mr. Homan predicted. "We wouldn't want to speculate on that," said Riggs spokesman Jim Day.
At Dillon, Read & Co., which underwrote Riggs' 1993 recapitalization, analyst Lauren Smith said the bank's progress would continue without Mr. Homan.
"It's a big surprise," he said, "but we feel confident it does not reflect on the stability or soundness of the institution. This should have no impact on the regulatory position of the company."