April 7, 2015 / 9:20 PM / 5 years ago

UPDATE 1-Hedge fund says BNY Mellon is 'bloated' with 10,000 excess staff

(Adds details from presentation, BNYMellon comment)

By Svea Herbst-Bayliss and Tim McLaughlin

BOSTON, April 7 (Reuters) - Activist hedge fund Marcato Capital Management on Tuesday said BNY Mellon Corp’s employee base is “bloated” and disproportionately larger than its rivals.

Marcato, which owns about 1.6 percent of BNY Mellon’s stock, previously has called for the ouster of Chief Executive Gerald Hassell, saying he has missed profit targets and has failed to streamline the bank’s expense base.

BNY Mellon, the world’s largest trust bank, declined to comment.

Marcato, a $3 billion fund led by Richard McGuire, said BNY Mellon rivals, including State Street Corp, Vanguard Group and BlackRock Inc, have far fewer employees. BNY Mellon’s latest headcount was 50,300, compared with State Street’s nearly 30,000, Vanguard’s 14,200 and about 12,200 at BlackRock, according to Marcato’s presentation and company filings.

In an earlier analysis released last month, Marcato estimated that BNY Mellon has 10,000 “excess” employees. That represents about 20 percent of the bank’s workforce.

BNY Mellon’s headcount has increased 3 percent from 48,700 at the end of 2011, according to its financial statements.

Roughly one month ago, the bank defended its chief and the progress he had made. A spokesman said, “Under Gerald Hassell’s leadership, BNY Mellon has continued to increase shareholder value, reduce costs, improve margins and streamline the organization, which our results clearly demonstrate.”

But Marcato’s presentation, which was posted on the website www.abetterbankofnewyork.com, says that the bank’s business is less productive, that costs have gone up and that margins have fallen. While the company’s share price has nearly doubled during Hassell’s tenure, Marcato says the company benefited more from improved market sentiment, which also helped its rivals, than strong earnings growth.

In the presentation, the fund said Hassell, a company veteran who was promoted to the top job when Bob Kelly abruptly left in 2011, has largely kept earnings targets steady even as he faces pressure from a handful of shareholders.

“Despite rhetoric about ‘moving faster and with greater sense of speed and urgency,’ new targets imply business as usual,” the hedge fund said in its presentation. (Reporting by Svea Herbst-Bayliss and Tim McLaughlin; editing by Andrew Hay)

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