BNY Mellon Names Former Visa Executive Scharf as CEO, Chairman -- 3rd Update

By Justin Baer Features Dow Jones Newswires

Charles Scharf is returning to Wall Street as the new chief executive of Bank of New York Mellon Corp., placing a retail banking veteran in charge of a firm that safeguards trillions of dollars for big institutions.

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Mr. Scharf, 52 years old, replaced Gerald Hassell as CEO Monday. The 65-year-old Mr. Hassell will remain chairman at BNY Mellon until Dec. 31, when he will hand the title to Mr. Scharf.

Mr. Scharf's challenge will be to jump-start growth and navigate the technological changes sweeping through the financial-services industry. The New York company responded to pressure earlier this decade from shareholders, including activist Trian Fund Management LP, to cut costs during a period of low interest rates. Profits have improved, but revenue growth remains tepid.

Mr. Hassell planned to retire once the firm showed progress on a series of goals set in 2014, according to the BNY Mellon CEO and Ed Garden, Trian's chief investment officer and a BNY Mellon director. Trian didn't push for a change in leadership, Mr. Hassell said in an interview.

"I have enjoyed a highly collaborative and constructive relationship with Gerald and am excited to welcome Charlie to BNY Mellon," Mr. Garden said in a statement.

BNY Mellon's shares rose 1.9% and closed at $53.35 on Monday. They have climbed 32% in the past year, underperforming the benchmark KBW Bank Index's 43% gain.

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The appointment gives Mr. Scharf a second chance at running a public company. He left the top post at San Francisco payments network Visa Inc. in 2016 so he could be closer to his family in New York.

Before heading to Visa in 2012, Mr. Scharf worked in the banking industry, including a seven-year stint running the enormous retail-banking division of J.P. Morgan Chase & Co.

A top lieutenant to J.P. Morgan Chief Executive James Dimon for roughly two decades, Mr. Scharf was at one time considered a potential successor. He left J.P. Morgan in 2012.

Mr. Scharf had been eager to return to his roots at a large financial firm, people familiar with the matter said. On Monday he said in an interview that he weighed options inside and outside the financial-services industry before concluding BNY Mellon "was one of the most exciting places to be" given the company's central role in the world's financial system.

The bank now has more than $30 trillion in assets under custody, and runs a collection of investment managers that oversee a combined $1.7 trillion.

Mr. Hassell spent his entire career at BNY Mellon. He was named CEO in 2011 when the company was still coming to terms with the lasting effects of a financial downturn. Low interest rates crimped its profits, and the bank's margins lagged behind those of rivals State Street Corp. and Northern Trust Corp.

He also had to wrestle with demands made by Trian, which purchased a stake in June 2014 and sought cost cuts. In October 2014, BNY Mellon unveiled plans to shed $500 million in expenses through 2017. That December, the company added Trian's Mr. Garden to its board.

The cuts and investments in technology helped lift profits even as revenue growth languished below some of BNY Mellon's biggest peers, Evercore ISI analyst Glenn Schorr said. In 2016, the bank reached many of its targets Mr. Hassell set in 2014, including those on its return on equity and operating margin.

Yet competition in the firm's core custody business has made it more difficult for BNY Mellon and its rivals to charge higher fees.

"Their business size and client mix has shown limited growth," Mr. Schorr said. "I'm not sure Charlie or anyone else in the world can impact that."

BNY Mellon, like its rivals, plans to develop analytics and other tools that harness the reams of data produced by its custody business. The company may also look to expand its markets business beyond its main currency-trading arm.

"Because of digitization, there are more opportunities to do things for clients if you have the right kind of structure," Mr. Scharf said.

Conversations about who would succeed him "have been under way for several years," Mr. Hassell said. The outgoing CEO turns 66 this year.

The company retained Korn/Ferry International to lead the search, and weighed several internal and external candidates. Several shareholders, though, expected BNY Mellon to choose an outsider.

Korn/Ferry reached out to Mr. Scharf late last year, and eventually introduced him to the board, a BNY Mellon spokeswoman said.

"Charlie became not only available, but the best person for the job," Mr. Hassell said.

In a memo to employees Monday, Mr. Scharf said "I know change is never easy, but I will do my best to make it smooth."

Emily Glazer contributed to this article.

Write to Justin Baer at justin.baer@wsj.com

(END) Dow Jones Newswires

July 17, 2017 17:04 ET (21:04 GMT)