Change is afoot at banking giant PNC Financial (NYSE:PNC). But with that change coming in the form of longtime PNC veteran James Rohr -- 40-plus years at the bank! -- stepping down as CEO, should investors be concerned?
To be sure, it wasn't always perfectly smooth sailing during the 20-plus years that Rohr was CEO. In 2002, for example, the company ran into some serious regulatory headaches, thanks to off-balance-sheet activities with insurance giant AIG. However, if we look back at the past decade, it's hard to miss the fact that PNC's tangible book value per share has tripled. Investors haven't seen huge stock returns, though, because valuation multiples are much lower than they were in the early 2000s -- an outcome that we can hardly lay at Rohr's feet.
The growth at PNC has been the focused result of Rohr expanding the bank's presence and aggressively growing through opportunistic acquisitions. Chief among those timely buys was National City, which ran into major problems during the financial crisis, and was swept up by PNC. While particularly large, National City was far from the only scalp on Rohr's belt. Its collection also included the venerable Riggs National, which was hammered by suspicions that it ran afoul of money-laundering and terrorist-financing regulations.
In other words, investors probably shouldn't be celebrating the departure of Rohr, since he's done an admirable job as the bank's chief. However, Bill Demchak, who is stepping into Rohr's shoes at the CEO spot, has been right in the mix at the top of PNC during the past decade's growth binge. Demchak came to PNC as its CFO in 2002, following the AIG-related accounting troubles, and has since also filled the roles of President and Senior Vice Chairman.
So, let's get down to brass tacks: What should investors make of the transition? Quite simply, they should expect to see a continuation of PNC's current direction. That is, a move toward being a serious banking presence with a larger geographic footprint, while continuing to nurse its balance sheet back to health and wringing maximum profitability from its current operations.
Meanwhile, with the bank's stock trading at a discount to book value -- as compared to a pre-crisis valuation that topped 2x book -- it would be hard to argue that it's too late for investors to hop on for the ride.