Tuesday, May 09, 2006

BMO's Retail Unit Head Quits Suddenly

Pearce joins a changing of the guard at an important component of the Big Five

The Globe and Mail, Sinclair Stewart, 9 May 2006

Bank of Montreal yesterday announced the surprise resignation of Robert Pearce as head of its personal and commercial unit, completing a top-level changing of the guard for the Big Five's retail operations: Not a single one of them can now boast a boss with more than 20 months on the job.

Retail banking is by far the most stable, important component of the industry's financial health, yet in the past two years it has come to resemble an executive turnstile. The departure of Mr. Pearce, which takes effect at the end of this month, means that the leaders of the country's major retail banks will now have fewer than five years of experience in their current positions -- combined.

"It could very well speak to just how good the Canadian banks are in Canada," one analyst said. "You'd have to really go out of your way to screw one up."

Mr. Pearce, 51, who discussed his departure with BMO executives last week, did not return phone calls seeking comment, but in an e-mail to colleagues he explained that it was a "difficult decision" to leave the bank after 26 years. He said he planned to spend some time with his family before embarking on a new career path.

The move comes just a few months after the retail bank reported a weak first-quarter performance relative to its peers, with profit increasing a scant 1 per cent. The results raised questions about the unit's crimped profit margins, and also its higher loan losses.

Bill Downe, a long-time corporate banker who was promoted to chief operating officer at BMO earlier this year, will take over stewardship of the retail bank on a temporary basis. Before Mr. Downe was promoted to COO, and all but anointed as successor to chief executive officer Tony Comper, some industry observers believed Mr. Pearce also had an outside chance at the top job.

Despite BMO's lacklustre retail showing in the first three months of the fiscal year, Mr. Comper and Mr. Downe affirmed in an e-mail to staff yesterday that they are committed to the strategic direction of the retail bank, and have "ambitious plans" for accelerating growth in both the personal and the commercial bank.

Mr. Pearce was only made head of the retail bank in 2002, but that is enough to make him a relative graybeard among his peers in the sector. Jim Westlake, who replaced Jim Rager at the helm of Royal Bank of Canada's domestic retail unit in September, 2004, is now the grizzled veteran of the group.

The duo of Tim Hockey and Bernie Dorval were named co-heads of Toronto-Dominion Bank's TD Canada Trust division at the end of 2004, while Sonia Baxendale was handed responsibility for Canadian Imperial Bank of Commerce's retail operations barely a year ago.

Chris Hodgson took the reins of Bank of Nova Scotia's retail unit just last month, following the retirement of Robert Chisholm. Scotiabank yesterday promoted Barb Mason to take charge of its wealth management group, to fill Mr. Hodgson's former position.

Well-entrenched distribution systems and solid brands have helped the banks absorb such high-level changes without causing much disruption. Bench strength, particularly in middle management, is clearly a key ingredient in the continued success of retail banking, which typically accounts for more than half of the industry's profit.

Yet all of these shuffles have also occurred during a particularly beneficent time for retail banking, despite occasional grousing about competition and shrinking profit margins. The credit climate is arguably as good as it's ever been, the economy is strong, and lending volumes continue to be propped up by low interest rates.

Another analyst, speaking on condition of anonymity, marvelled at how the retail banks are churning out record results despite having so much change. On the other hand, he pointed out, "none of the people have really been tested."