Management shakeup sees Ron O'Hanley follow Joseph Hooley as chief executive
By Justin Baer
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 8, 2017).
State Street Corp. Chief Executive Joseph Hooley and President Michael Rogers plan to retire as part of a leadership shake-up, the giant custody bank said Tuesday.
Former Fidelity Investments executive Ron O'Hanley will succeed Mr. Hooley as CEO by the end of 2018, the company said. State Street this week appointed Mr. O'Hanley president and chief operating officer, replacing Michael Rogers.
"He's the logical choice," said Mr. Hooley, 60 years old, who joined the bank 31 years ago. "Ron represents an individual with great vision, and a strategic mind. He has lived in the shoes of our core client set for most of his career."
Mr. O'Hanley, 60, was previously in charge of State's Street's asset-management business, where he pushed to round out the firm's investing offerings beyond index-tracking funds. He joined the Boston company in 2015 from Fidelity, where he was president of asset management and corporate services. Earlier in his career he ran Bank of New York Mellon Corp.'s money-management arm.
In his new roles, Mr. O'Hanley said he would be spending a lot of time on the bank's technology initiatives, both in developing new products and in making sure they meet clients' needs. "That will be what distinguishes us from our competitors," he said.
"The life of the asset manager and the asset owner has just become more complicated," Mr. O'Hanley, who came to know Mr. Hooley when he was a custody client of State Street's, said of the pressures many in the industry now face.
Mr. Rogers, 60, joined State Street through the 2007 acquisition of Investors Financial Services Corp., a smaller custody bank once known in the industry as "Little State Street." Mr. Rogers had been Investors's president, and was persuaded by Mr. Hooley, then State Street's vice chairman, to remain at the company following the sale. He stayed, but began to discuss his eventual exit with Mr. Hooley as the CEO was starting to set in motion his own succession plan, one person familiar with the matter said. Mr. Rogers will retire from the company at the end of 2017, the company said.
State Street joins rivals BNY Mellon and Northern Trust Corp. in unveiling succession plans this year, a mark of an industry adapting to sweeping changes. Many of the banks' top clients are asset managers under immense pressure to lower costs and find new areas of growth as investors shift assets to ETFs and other low-cost funds.
"What's remarkable is how in a business that's really stable and sort of beautifully boring that you have a decent amount of management change," said Brennan Hawken, an analyst with UBS Group AG. "When you're going through this magnitude of change, ushering in a new perspective can make a lot of sense."
Mr. Hooley, who became CEO in 2010, led State Street through the aftermath of the last financial crisis. The downturn ushered in a new era of regulations restricting how large banks took risks and returned capital to shareholders, and U.S. officials deemed State Street, along with its rival, BNY Mellon, a systemically important firm, adding to the banks' regulatory burdens.
In 2011, State Street found itself targeted by activist investor Trian Fund Management LP. Trian argued State Street should be more profitable than it was and called for the spinout of the asset-management arm.
Mr. Hooley responded by cutting expenses and seeking the Federal Reserve's approval to buy back more stock. Trian eventually pared its stake in State Street.
The bank had made strides to boost profitability, Mr. Hawken said.
"At this stage, he has made the changes that he was in a position to effect, and got State Street on stable footing," he said. "Investors' view of State Street's stock is meaningfully better."
State Street's shares have climbed 17% this year and hit an all-time high last month.
At the start of 2017, Mr. Hooley said he told State Street's board that he believed "a couple more years felt right," following progress made on technology investments in its core custody and asset-servicing division and other businesses.
The board agreed, and the search for Mr. Hooley's successor looked at both external and internal candidates. Mr. Hooley said the board asked him to stay on as chairman for one more year after he steps down as CEO, and he agreed.
State Street picked another Fidelity alumnus, Cyrus Taraporevala to succeed Mr. O'Hanley as president and chief executive of State Street Global Advisors, the bank's $2.7 trillion asset manager.
State Street Global Advisors, best known for its lineup of low-cost exchange-traded funds, last year acquired General Electric Co.'s asset-management unit to beef up its ties to insurers and defined-benefit plans that outsource their portfolios.
More recently, SSGA slashed its management fees on 15 ETFs to lure more retail investors. State Street had launched the first ETF more than two decades ago, but in recent years the firm had lost ground to Vanguard Group and BlackRock Inc.
Write to Justin Baer at [email protected]