James Rohr, chief executive of PNC Financial Services Group, knows how to make inroads in a community as an out-of-towner acquiring a treasured local institution.
Before his Pittsburgh-based PNC acquired Baltimore's Mercantile Bankshares Corp. last year, it bought up Washington-based Riggs National Corp., which like Mercantile traces its history in its hometown to the mid-1800s.
Last week Rohr traveled to Baltimore to nurture client relationships and to meet with people like H. Furlong Baldwin, who was Mercantile's CEO for 25 years until 2001 and who remains a mover-shaker in the city. Rohr also sat down with The Sun during his stay to talk about his plans for the future as well as Mercantile's technology upgrade and PNC's decision to eliminate about 900 mostly back-office jobs.
Rohr, 58, learned the banking ropes at Pittsburgh National Bank, where he was recruited out of college. When he started, he thought he would spend a short stint there and hoped to start a small business. Now he jokes that he never came up with a great idea for a business so he stayed. Thirty-five years later, he's CEO.
In the past three years, PNC more than doubled its annual profit to $2.6 billion in 2006 and is now one of the nation's largest banks by deposits. Rohr has aimed to expand in affluent areas with rapid population growth, and he hasn't been afraid to buy troubled banks to do so. Riggs, for one, was mired in a scandal over its handling of suspicious transactions for former Chilean dictator Gen. Augusto Pinochet when PNC acquired it.
This year PNC also bought Sterling Financial Corp. in southern Pennsylvania after the bank uncovered fraud that cost it about $165 million, and Yardville National Bancorp in New Jersey after its operations had come under the supervision of federal banking regulators.
Rohr can be a name-dropper of people he considers smart. In an hourlong conversation he mentioned Henry Kravis, the private equity king with whom he plays the occasional round of golf, and David Kelley, the Stanford University professor and computer-mouse inventor whom he has befriended.
Let's talk about your acquisition streak. We tried to buy Riggs for years. It was the No. 1 bank in the nation's capital, a fast- growing city, all the rest, and it wasn't for sale. Then when they got in trouble with regulators, it was for sale.
Mercantile was a high-quality bank that was not for sale. But they had a very large technology expense coming up, and I think the board realized ... if we embark on this technology expense over the next three years, it's going to cost us a lot of money, and at the end of the three years other people will have been spending money on technology, too, so we're not sure our technology will be competitive. That really to me was the issue. When they looked at it, they said maybe it's time to partner.
They looked for a partner who's committed to the community, and our bank is second to none when it comes to being committed to the community. We feel very strongly in local leadership. Regional presidents are important to us because banking is a local business. Decisions about credit are made locally, and that was part of the Mercantile franchise as well.
So philosophically, we were very much in the same space, and last but not least, CIO (Chief Information Officer) magazine regularly names us one of the top 100 technology companies in America.
Are more acquisitions on the horizon?
The strategic plan really is to just grow your business, and if opportunistic acquisitions come along, you try to make them if they are the right ones for you. A lot of other acquisitions have come and gone that we haven't had any interest in.
I'm not particularly worried about other acquisitions as we speak. Something else might come up for sale that's different, but right now we are just focusing on running the company.
What are your plans for the Baltimore area?
Already, our sales are ahead of where we thought we were going to be. We are very pleased about that, and that's without people having the opportunity to use the technology that we're going to be putting in on Sept. 15. That's the conversion date. All of our customers will have free online banking and bill pay, something they didn't have before. They'll have free ATM machines globally that they didn't have before.
Will you expand here?
We're building branches, and we're also adding private bankers. We'll add brokers; we'll add small-business bankers. So what happens is that you do lose the back office, but because the product mix we have is so much more robust, we'll end up with different types of jobs that we will add back into the community over the next two to three years.
Obviously, there is a lot of angst about what will happen at Mercantile. What about the investment and wealth management division?
Kevin McCreadie [from Mercantile] is now the chief investment officer for all of PNC, and so all of the investment activities on the private banking side are headquartered here. So that was a win for Baltimore. Private banking is in two parts. It's the customer portion and then there's the investment product side. ... Jay Wilson [from Mercantile] remains here and handles high- net-worth clients, so that hasn't changed at all. That's a very local business.
With some executives getting merger-related payouts and employees getting laid off, how do you address the perception that people at the top are the ones that benefit from a transaction like this and not the rank-and-file employees?
In a transaction like this, you do eliminate the duplicative jobs. That happens. And we have one of the most generous severance packages in the industry. ... In terms of senior officers, there are change-of-control agreements, and those are executed and, by the way, a number of those people aren't here anymore either.
How would you compare and contrast yourself with Ned Kelly [the Mercantile CEO who sold the bank to PNC and then left the company]?
Oh, I don't know. That's for somebody else to say. Ned's a very bright man. One of the most eloquent people I've ever met in my life, a very smart guy.
OK, so how do you want to be perceived?
We have really focused on the four constituencies. I think we have served the shareholder very well. If you don't do that, you don't get to play anymore.
We believe in taking care of the employee and we measure customer satisfaction. There's a 90 percent correlation between employee satisfaction and customer satisfaction. And there's a 90 percent correlation between happy customers and their willingness to do more business with you.
Finally, when I came to the old Pittsburgh National Bank, the first thing I had to do was sign my United Way pledge form. So in the culture of banking, the community is really important.