Canadian Imperial Bank of Commerce (CIBC) at Bay and King Streets in the Financial District in Toronto.Deborah Baic/The Globe and Mail
Canadian Imperial Bank of Commerce has singled out Richard Nesbitt, the head of its investment banking division, as the leading candidate to succeed chief executive officer Gerry McCaughey.
Mr. McCaughey's decision to throw his support behind Mr. Nesbitt, a close friend of his, has resulted in the biggest shakeup of CIBC's senior management ranks since Mr. McCaughey was named CEO in 2005.
The shuffle sent ripples through the financial sector. Sonia Baxendale, who has been running the bank's consumer and small business operations, decided to leave after learning that she would not become CEO, according to sources who spoke on condition of anonymity.
Ms. Baxendale, one of the highest-ranking women on Bay Street, was widely considered one of the top internal candidates for the role, along with Mr. Nesbitt, who joined the bank three years ago as it was staggering under the weight of a multibillion-dollar loss on U.S. mortgage securities. However, Mr. McCaughey recently signalled internally that he will be backing Mr. Nesbitt for the top job.
Mr. McCaughey, who is 55, has no plans to retire any time soon, but the shuffle is intended to sketch out a clearer path for his eventual succession.
The shakeup comes as CIBC has been placing new emphasis on generating growth in its less-risky retail operations, while putting less focus and capital on expanding investment and trading unit, which was responsible for the mortgage losses.
"The changes we are announcing today will enable us to continue to execute our strategy while providing key members of our management team expanded responsibilities and new mandates that will be critical as we continue to grow our business," he said in a statement.
Ms. Baxendale, who joined the bank in 1992, has been running CIBC's core Canadian retail banking business for the past six years.
The hastily-orchestrated executive shuffle spurred by her departure will see chief financial officer David Williamson take over CIBC's Canadian retail operations. Though Mr. Williamson, who served as CFO since 2008, now also emerges as a potential successor to the CEO, sources close to the bank say the job is the 55-year-old Mr. Nesbitt's to lose.
Kevin Glass, who joined CIBC in 2009, will become CFO, while Victor Dodig was named group head of wealth management.
When Mr. McCaughey was named CEO, CIBC was in the midst of dealing with a costly misstep related to Enron, and Mr. McCaughey's main task was to remove risk from the bank. But within a couple of years, CIBC, Canada's fifth-largest bank assets, was shaken by the realization that it had amassed billions of dollars worth of exposure to securities backed by U.S. subprime mortgages, exposure that would cause more than $10-billion in writedowns. That problem has now been dealt with, and in a highly unusual move, CIBC has put Mr. McCaughey in a number of its television ads, making him the public face of the bank.
Mr. Nesbitt, a former CEO of the Toronto Stock Exchange's parent company, and Ms. Baxendale both oversaw key roles in the bank's recent efforts to put its mistakes behind it. But revenue at CIBC Retail Markets, which was up 6 per cent to $2.54-billion in the first quarter of this year, has not risen as fast as analysts would have liked in recent years.
The bank has stated that it wants to increase profits from its consumer lending operations - which came in at $627-million in the latest quarter - by more than a third in the next three years. However, analysts are concerned that a growing reliance on real estate lending in Canada could cause loan growth to slow later this year as the housing market cools.
Less than a year ago, Ms. Baxendale was given added responsibility, taking on oversight of CIBC's international lending operations, which are expected to become more important to the bank in the future. On Monday, the bank said it would hand responsibility for the international operations over to Mr. Nesbitt, giving him experience in retail banking. CIBC has retail banking operations in the Caribbean, along with investment management business in Hong Kong and Singapore.
Though Canadian banks earn the majority of their profits from retail banking, few have CEOs who rose through the retail ranks. Most bank heads come with an investment banking background.
In general, since most of the costliest gaffes that CIBC and other lenders have found themselves in over the years have often resulted from the investment banking side of the bank, boards tend to feel most comfortable with CEOs who know this area. And Bay Street tends to have a bias that results in investment bankers earning more respect, and money, than their retail banking peers.