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Banking

Bank CEO ranking

Which CEOs have created (or destroyed) the most shareholder value? Euromoney's latest ranking shows that, despite the reverses of 2007, most remain in credit with investors.

Board stupid

The make-up of many banks’ boards of directors means they simply aren’t qualified for the task.


Rijkman Groenink

Rijkman Groenink: Should ABN’s maligned former CEO deserve more credit?

Most chief executives of the world’s largest financial institutions remain in credit with the shareholders in terms of growing the market capitalization of their bank since becoming CEO, despite billions of dollars of value being wiped out in the wake of the credit crunch. The total market value of the 17 banks in Euromoney’s survey stood at $1.803 trillion at the end of 2006. Exactly 12 months later it was $1.592 trillion. More than $200 billion has therefore been lost – more than twice the announced write-downs at the end of January.

Lehman Brothers’ market cap fell almost $7 billion in 2007, a rare reversal for its CEO, Dick Fuld. But Fuld remains the champion at creating shareholder value – Lehman’s market cap has grown at an astonishing compound annual growth rate of 25.2% during the 14 years of his tenure.

He narrowly edges out Goldman Sachs’s Lloyd Blankfein, who has grown Goldman Sachs’s value by an average of 24% during his two years in charge.

Only two bank CEOs actually improved their CAGR performance during 2007 – and one is out of a job. That’s not Alessandro Profumo, the acquisitive head of UniCredit, whose market cap rose by more than $20 billion in 2007, in part because of the integration of local rival Capitalia.

Dick Fuld, Lehman Brothers: champion of creating shareholder value

Dick Fuld, Lehman Brothers:

But the best-performing chief in 2007 was one of the most maligned. Rijkman Groenink now looks like a hero to ABN shareholders for securing an asking price of more than $100 billion from the RBS, Fortis and Santander consortium. Over the eight years of his tenure, Groenink delivered a CAGR of 14.8% in ABN’s market cap.

Contrast that with the rival bidders for ABN’s business. Fred Goodwin’s halo has slipped as Royal Bank of Scotland’s market cap fell $35 billion in 2007. Over his seven years in charge Goodwin has averaged only 3.5% annual growth in value.

Many of its investors will be pleased that Barclays lost out on ABN. But will shareholders be happy with John Varley’s performance? The UK bank’s chief executive has delivered a negative CAGR – minus 2.1% – during his four years in charge.

Perhaps the most telling piece of data is that, at the end of 2007, either RBS or Barclays could have bought both Morgan Stanley and Merrill Lynch for little more than the price that was paid for ABN. Although Stan O’Neal delivered a CAGR of almost 10% while at Merrill’s helm, the real value he created for shareholders won’t become clear until Merrill has emerged from its rounds of write-downs and capital injections.

Bottom of the table is Citi’s now departed chief executive, Chuck Prince. It seems harsh to kick a man when he is down and out, but owners of Citigroup stock will not look back fondly on his reign. Over his four years in charge, Citigroup’s market value declined by an average of 8% per annum.

Most CEOs are still adding value to shareholders
Market capitalization in $billion and compound annual growth rate of bank market cap since CEO took over
Bank Mkt cap 31/12/06 Mkt cap 31/12/07 Difference CEO Appointed Years in job Mkt cap at appointment CAGR CAGR end 2006
Lehman Brothers 41.4 34.7 –6.7 Dick Fuld 1994 14 1.5 25.2% 31.5%
Goldman Sachs 88.7 91.5 2.8 Lloyd Blankfein 2006 2 59.4 24.1% 49.3%
Credit Suisse 84.8 85.2* 0.4 Ossie Grubel 2003 4 41.2 19.9% 27.3%
Deutsche Bank 69.9 67.4 –2.5 Josef Ackerman 2002 6 28.7 15.3% 25.0%
UniCredit 90.6 111.6 21 Alessandro Profumo 1998 10 27.5 15.0% 12.7%
UBS 127.8 127.5* –0.3 Peter Wuffli 2003 4 73.1 14.9% 20.5%
ABN Amro 61.3 103* 41.7 Rijkman Groenink 2000 8 34.1 14.8% 10.3%
Société Générale 78.2 67.8 –10.4 Daniel Bouton 1993 15 9.8 13.8% 17.3%
BNP Paribas 101.4 98.8 –2.6 Baudouin Prot 2003 5 53.7 13.0% 23.6%
Bear Stearns 23.6 12.8* –10.8 Jimmy Cayne 1993 15 2.8 10.7% 18.0%
Merrill Lynch 82.3 56.5* –25.8 Stan O’Neal 2002 5 35.2 9.9% 23.7%
HSBC 210 198.9 –11.1 Stephen Green 2006 2 181.8 4.6% 15.6%
RBS 123.9 88.7 –35.2 Fred Goodwin 2001 7 69.5 3.5% 12.3%
JPMorgan 167.6 146.6 –21 Jamie Dimon 2004 4 138.8 1.4% 9.9%
Morgan Stanley 85.4 56.4 –29 John Mack 2005 3 59.3 –1.7% 44.1%
Barclays 93 66.5 –26.5


 250.3
0.0%
 Citi  273.7  178.8*  –94.9 Chuck Prince  2003 4 
 250.3  –8.1%
* Where CEO has left the bank, figure is for market cap on the day of departure, with the exception of Jimmy Cayne, who gave up his CEO role after the 31/12/07 cut-off date:
Ossie Grubel – 04/05/07, Peter Wuffli – 06/07/07, Stan O’Neal – 30/10/07, Charles Prince – 1/11/07, Rijkman Groenink – 11/10/07
Source: Euromoney, Bloomberg market data
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