Wall Street banks have been losing chief financial officers at an unusually high rate since the financial crisis, a trend that is unnerving investors at a time when they crave a return to stability in the sector.
The surprise decision by Bank of America last Friday to replace Chuck Noski after just a year as CFO means that all the large US financial institutions, with the exception of Goldman Sachs, have replaced their finance chiefs in the past two years.
This sector-wide wave of change is uncommon for corporate America where CFOs tend to stay for several years and play a crucial role not only in companies’ internal workings but also as a linchpin in their relationships with investors and regulators.
At General Electric , for example, Keith Sherin has been CFO since 1998, serving under two chief executives: Jack Welch and Jeff Immelt. Goldman’s David Viniar has been CFO since the company went public in 1999.
Analysts said the merry-go-round of CFOs on Wall Street was alarming given investors’ concerns over the strength of banks’ finances and their ability to deal with more stringent regulations and capital requirements.
“It is always a red flag when the CFO of a bank leaves,” said Mike Mayo, an analyst at CLSA. “It is our job to ask questions and try and find out if there is anything serious behind it”.
Glenn Schorr, an analyst at Nomura, wrote to clients on Friday that the replacement of BofA’s Mr Noski was an “eyebrow-raising event”.
Mr Noski’s move to become a vice-chairman and his replacement by chief risk officer Bruce Thompson came two months after Howard Atkins abruptly resigned as CFO of Wells Fargo , the San Francisco-based lender.
Both banks said their CFOs left for personal reasons, but investors were left speculating about other motives behind the moves. Other departing CFOs over the past two years include Colm Kelleher and Michael Cavanagh, of Morgan Stanley and JPMorgan respectively. Both were deemed to have performed well during the financial crisis and were replaced with highly-regarded internal candidates: Ruth Porat for Morgan Stanley and Doug Braunstein at JPMorgan .
At Citigroup, John Gerspach was the bank’s fifth finance chief in five years when he took over in July 2009 amid a spat between Citi’s management and the Federal Deposit Insurance Corporation, one of its regulators.
Corporate governance experts say that companies have a duty to provide the markets with complete information on such decisions.
“The departure of a CFO is a reason for concern and investors need a full explanation of their reasons and rationale to allay their fears,” said Charles Elson, director of the centre for corporate governance at the University of Delaware.