What Kelly’s exit means for Pershing

It’s been a rough patch of late for Bank of New York Mellon Corp., which has been beset by legal challenges and an underperforming stock price. On Wednesday, those problems came to a head, as chairman and chief executive Robert P. Kelly resigned after a dispute with directors over the way he ran the company.

At this point, it’s difficult to tell what impact the loss of Mr. Kelly will have on the Pershing LLC unit of BNY Mellon. The big clearing firm operates under its longtime leader, chairman Richard Brueckner, and a number of other Pershing veterans, including CEO Brian Shea.

A spokesperson for BNY Mellon was not available for comment about Mr. Kelly’s resignation. And several broker-dealers that clear through Pershing were unaware of the CEO’s resignation when contacted by InvestmentNews.

But a Pershing source who was not authorized to speak about the departure — and who asked not to be identified — said the change had nothing to do with company strategy. The source also said that Pershing’s business would not be affected.

Pershing, the largest clearing firm in the U.S., according to InvestmentNews data, had 836 broker-dealer correspondents as of June. The RIA custody unit, Pershing Advisor Solutions LLC, had 650 advisory clients with $93 billion in assets as of the second quarter.
PAS has been led by chief executive Mark Tibergien since 2007.

Through a spokesman, Mr. Tibergian and Mr. Shea both declined to comment for this story.

Mr. Kelly, 57, had been at BNY Mellon since 2007. He was once touted as a possible replacement for Kenneth Lewis at Bank of America Corp. in 2009 but indicated that he wasn’t interested in the job. Mr. Kelly exited from BNY Mellon by “mutual agreement” with the board, the company said in a statement this week.

His successor is Gerald L. Hassell, 59, who has been president of BNY Mellon since 1998. Mr. Hassell joined Bank of New York as a management trainee in 1973 and has been on the board of directors since 1998.

BNY Mellon’s stock price has tumbled 32% this year and trades at about the same level as in early 1997. The custody bank has also been sued for allegedly overcharging pension funds on foreign-exchange trades and has been accused by New York’s attorney general of violating state law in its role representing investors in mortgage securities. The bank has denied any wrongdoing in all the cases.

“The stock price is the ultimate measure of a CEO’s job, and the stock hasn’t done well,” Gerard Cassidy, an analyst at RBC Capital Markets LLC, said.

Mr. Kelly earned $19.4 million last year, a 38% increase from 2009, boosted by stock awards and incentive pay, according to a regulatory filing. He became head of BNY Mellon after the bank bought rival Mellon Financial Corp. in July 2007, vaulting the company past
JPMorgan Chase & Co. as the largest custody bank. Mr. Kelly previously had led Mellon, which recruited him from Wachovia Corp. in 2006.

BNY Mellon bank said Aug. 10 that it planned to cut 1,500 jobs, or 3% of its 48,900 employees.

(This article was supplemented by reporting from Bloomberg News.)