Ending a short but depressing
-like interim regime,
finally has a new leader in the form of ex-
executive Jamie Dimon. And investors, judging by their reaction to news of his appointment, believe Dimon will be a lot more successful at cleaning up and reviving his office than
After news of Dimon's appointment as chairman and chief executive was leaked Monday afternoon, Chicago-based Bank One's shares bounced strongly. They were quoted at 6:30 p.m. EST at 32, up 3 5/8, or 13%, on three times the normal volume.
Before Monday's rally, the bank's shares had fallen a bruising 50% since Aug. 24, when it
disclosed big problems in its
credit card division and slashed its earnings outlook. The dysfunctional bank then revised down profits forecasts again in
November and made special earnings-eroding charges in
The 44-year-old Dimon succeeds acting-CEO Verne Istock, who took over in December following the
retirement of John McCoy, the long-serving chief executive and architect of the modern Bank One. McCoy was generally -- but perhaps unfairly -- held responsible for the bank's difficulties.
"I don't think they could've picked a better leader," says one bank stock fund manager of Dimon. (He owns Bank One shares and requested anonymity.) "They needed a strong leader with no baggage." Dimon's appointment, which was
mentioned as a possibility by
late last year, was approved during a specially held board meeting Monday.
During a press conference, Dimon was optimistic about what he believes he can do with Bank One, which is the nation's fourth-largest bank, with $269 billion of assets.
"I'd love to build it into one of America's great financial companies," he said.
This statement is a clear sign that Dimon, who has led a life of leisure since his unexpected departure in November 1998 from Citigroup, is now resolved to become one of the country's most important financial services executives. He made a name for himself as a right-hand man to Sandy Weill, Citigroup's chief executive and co-chairman. Ironically, recent speculation that Citi may buy Bank One probably will die down as investors assume it now has a greater chance of maintaining its independence with Dimon at the helm.
Even so, Dimon probably has never faced a task as daunting as this one. While he did help restructure underperforming firms that he and Weill acquired together at
, now part of Citigroup, he's never had to deal with a company as large and beleaguered as Bank One.
Dimon's appointment "is a marginal positive, but he's got a tough row to hoe there," says Sean Ryan, an analyst at White Plains, N.Y.-based bank stock brokerage
, which doesn't do any underwriting. It rates Bank One a sell, and Ryan on Monday urged clients to sell the stock into any strength generated by Dimon's appointment.
Bank One "is still saying that it will make at least $2.80
per share in operating earnings this year, which is totally bogus," Ryan adds.
"To comment on earnings, it's too early," Dimon responded on the call. Istock said the bank was "still very comfortable" with its earnings-per-share range of $2.80 to $3 that it had forecast in January.
The fund manager who requested anonymity is advising that Bank One sell First USA because he believes it will take too long to reform. He figures it'll take a much-revamped marketing effort to stem the outflow of customers from First USA, which isn't possible overnight.
Dimon, at least for now, wants to hang on to it. "First USA is not for sale," he said on the call. And to stress his commitment to his new job, Dimon said he'd bought 2 million Bank One shares with his own money. At Friday's close of 28 3/8, that's $56.8 million. He declined to give details of his compensation package.
As originally published, this story contained an error. Please see
Corrections and Clarifications.