The sudden power shift at Synovus Financial Corp. Monday provided a crash course in crisis management — and a reminder that banks must be prepared to handle challenges unrelated to the crisis of recent years.
The $32 billion-asset company, which was already vulnerable because of credit-quality problems and seven consecutive quarters of net losses, said that its chairman and chief executive, Richard Anthony, had taken medical leave to undergo treatment for a blood vessel disorder that was diagnosed last week. Synovus named Kessel Stelling, its president and chief operating officer since February, acting CEO and board member James Yancey acting chairman.
Synovus' response — characterized by swift action, detailed discussion of Anthony's condition and reassuring words from Stelling to employees, investors and the media — won praise from some experts.
"The key is for an organization to come across as confident, competent and compassionate," said Jonathan Bernstein, the president of Bernstein Crisis Management in Sierra Madre, Calif.
"It seems like they are doing the right thing and have a classic, well-thought-out succession planning process," Bernstein said. Having such a plan is critical for banks right now, he said. "These plans, more than in the past, must be executed flawlessly. That's not to say they are perfect, but there's not a lot of margin for error."
Synovus, of Columbus, Ga., gave no estimate for the duration of Anthony's treatment or the management assignments.
Stelling said Synovus learned of Anthony's symptoms a few weeks ago, and it thought he'd be back on the job this week after he was admitted to the hospital early last week.
By the middle of last week, however, Anthony was diagnosed with a serious condition called Wegener's Syndrome and Synovus began to activate plans for a handoff.
Anthony, 64, and Stelling, 54, talked briefly on Sunday by phone, one of many conversations the two have had in recent weeks. "We've been in close contact even as he was trying to figure out what was going on," Stelling said in an interview Monday. "We're taking it one day at a time and running the company every day as if he will be back tomorrow. We're a united executive team here."
Shortly after 9 a.m. Monday, Synovus made the changes public. Within an hour Stelling had begun giving media interviews.
His morning started with a conference call with Synovus' market presidents and regional CEOs. He advised them that Synovus' priorities remained unchanged even though someone new was in charge. The message: "Credit is still the primary driver of our performance." Stelling also called big investors, some of whom participated in a $1 billion capital raise last month. "And I'm certainly available if others want to talk," he said.
Anthony has spent much of his five-year tenure as CEO changing the strategic direction and putting out fires at Synovus. He led the decision to spin off the card processor Total System Services Inc. in 2007 and has overseen a nearly completed effort to consolidate dozens of charters into a single bank.
Anthony also spent several years de-emphasizing commercial real estate lending, though not in time to save Synovus from billions of dollars in chargeoffs and the seven straight quarters in the red. Synovus also must eventually repay $968 million of capital from the Troubled Asset Relief Program. In January Anthony said it was possible Synovus could have a profitable quarter by yearend.
"We still see the opportunity to return to profitability" this year, Stelling said, declining to be more specific given that the second quarter is nearly over. "The key drivers remain nonperforming loan inflows and credit migration. Both need to slow and reverse."
Synovus has long prized smooth successions, including the 2005 transfer of CEO duties from James Blanchard to Anthony. A year later, Anthony inherited the chairman title from Yancey in another orderly shift. That tradition was interrupted last year, when the president and chief operating officer Frederick Green 4th abruptly resigned, leaving some to wonder who would be the heir apparent. Synovus answered that question in February, promoting Stelling to the vacant posts. Since then, he has worked closely with Anthony on a number of initiatives, including the charter consolidation and capital raise.
Craig Siegenthaler, an analyst at Credit Suisse Securities USA Inc., said Synovus laid the groundwork for an eventual transition over the past few months. "There have been some bad handoffs in the past at other companies, but this one should be one of the smoother ones due to the close working relationship" between the executives, Siegenthaler said.
Analysts point to Regions Financial Corp., where its chairman and CEO, Jackson W. Moore, was hospitalized in February 2005 after a blood vessel ruptured near his brain. About a year later, the company bought Birmingham, Ala., rival AmSouth Bancorp and Moore subsequently turned over day-to-day management to the former AmSouth CEO C. Dowd Ritter.
Others look at Wachovia Corp., which had no internal CEO-designate ready to step in when G. Kennedy Thompson was ousted in May 2008. The company hired outsider Robert K. Steele two months later, but the absence of an immediate selection frustrated analysts and investors during the search process.
Synovus shares lost as much as 2 cents Monday but reversed course and closed 3 cents higher, at $2.90 a share. Bernstein said investors will understand that unexpected events will take place, giving companies leeway "as long as they get honest and transparent information."
Stelling said that was the underlying message he received from a conversation over the weekend with Anthony's wife. "She told me, 'Richard said he doesn't have any secrets. Tell people what's going on and that he looks forward to coming back to work.' "