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Flagstar Bancorp's staggering $200.3 million fourth-quarter loss might have seemed as bad as it could get.
March 17 -
The story of Flagstar Bancorp Inc. just keeps getting curiouser.
February 2 -
The incoming chief executive at Sovereign Bancorp Inc. will face challenges getting the nation's largest thrift company back on track, according to analysts who follow the company.
October 1 -
Sovereign Bancorp Inc. chief executive Joseph P. Campanelli concedes that even after a year and a half of restructuring, Sovereign still has some work to do to prove itself.
May 27
As the new president and chief executive of Flagstar Bancorp Inc., Joseph P. Campanelli has a lot of work to do, but he has been in challenging situations before.
He led Sovereign Bancorp Inc. of Wyomissing, Pa., for a turbulent two years before leaving in September 2008.
In announcing his appointment Thursday, the $16.4 billion-asset Flagstar of Troy, Mich., touted Campanelli as an established corporate leader who is capable of effecting transformational change.
Flagstar needs such talent right about now, said Terry McEvoy, an analyst at Oppenheimer & Co. "This is really a positive for the company. Their ability to attract a known banker speaks to its sustainability and the underlying potential it has once it works through the problems."
The company, reeling from trouble with its mortgage lending business, has lost $450 million since 2007, including $76.6 million in the second quarter. And despite heavy chargeoffs, nonperforming assets remain elevated, totaling $1.1 billion, or 6.64% of total assets, at June 30. The nonperformers rose 120% from a year earlier and 10% from the first quarter.
Campanelli succeeds Mark T. Hammond, who announced this summer that he intended to step down as president and CEO in January. The company declined to discuss the hiring or Hammond's early exit. Campanelli and Hammond, who remains the company's vice chairman, also declined to comment.
But Campanelli said in a press release that he is "thrilled" to join Flagstar. "This is an exciting time and there are tremendous opportunities for growth," he said.
Several analysts who followed Sovereign (now part of Banco Santander) said Campanelli is likely to be an asset.
"I don't know the situation over at Flagstar, but I think his experience — particularly with a much larger bank — should suit them well," said Joseph Fenech, an analyst at Sandler O'Neill & Partners LP.
Campanelli ascended to the top post at Sovereign in late 2006, after the $89 billion-asset company ousted longtime CEO Jay S. Sidhu.
Sidhu's focus had largely been on growth by acquisition, but Campanelli's tenure was about improving profitability, amid increasing credit-quality problems. He restructured the balance sheet, exited the correspondent mortgage business and cut 7% of the company's work force.
"Joe and his team took a lot of positive steps on his watch," Fenech said. "He inherited a really tough situation, and he did what he could with it."
Campanelli also had been part of Sovereign's earlier growth.
Before becoming the CEO, Campanelli headed the company's New England division, where he oversaw the integration of 268 branches that Sovereign acquired in 1999. The branches had been operated previously by FleetBoston Financial Corp. and had to be divested after its sale to Bank of America Corp.
"He was known for his ability to grow the business," said Collyn Gilbert, an analyst at Stifel, Nicolaus & Co. "He did a great job of growing the New England franchise."
John Carusone, the president and CEO of Bank Analysis Center Inc., a consulting firm in Hartford, Conn., said that, as Sovereign's CEO, Campanelli reduced credit risk by shrinking its asset size but agreed that his reputation comes more from growing the company than working out loan problems.
"There are people who are known specifically for their credit abilities, and I wouldn't put him in that category. He is an integrationist and expansionist," Carusone said.
Still, Carusone said, he could see why Flagstar would want Campanelli. "He is a strong general manager with proven qualities of leadership."
Though Campanelli will have to deal with the company's protracted credit problems and a recent delisting threat, capital is not among the more pressing issues at Flagstar. It has a total risk-based capital ratio of 13.67%, well above the required regulatory minimum.
The company got $266.6 million of capital from the Treasury Department's Troubled Asset Relief Program, and during the past year the New York private-equity firm MatlinPatterson Global Advisors LLC has invested $350 million in Flagstar, taking a 70% stake.
Dealing with such large investors is one of Campanelli's strengths; at Sovereign, he helped repair relationships that had been frayed by the controversial Sidhu, Fenech said.
"Prior communication with investors and the Street was pretty strained under the former CEO," Fenech said. "He is a very direct guy and was quick to acknowledge a lot of the concerns investors had."
