All Things Must Pass

Don’t fret over the departure of Lou Maiuri from State Street. It will be BaU before you know it.

A multinational corporation is similar to a giant game of Jenga. Pull a piece out, and you never know quite what is going to happen. Sell a business unit, and who knows exactly how it will affect the remaining lines. It happened to J.P. Morgan when it sold off its European custody business in 1995 to BNP Paribas; the first trading day after the sale, J.P. Morgan’s treasury professionals were surprised and perplexed at the lack of deal flow. They called the corporate bankers, who advised them that all that flow had moved as part of the sale. Oops!

So what happens when your president & COO leaves? State Street is about to find out. The announcement that Lou Maiuri, its president, COO, and head of investment services, is to retire from the bank in early 2024 took the market by surprise. For the longest time, Maiuri has been a front-runner to replace Ron O’Hanley, chairman & CEO, when he finally steps down (although not confirmed, it is believed that O’Hanley re-upped his contract earlier this year). Other possible future leaders, such as Francisco Aristeguieta and Andrew Erickson, are no longer in the running (Aristeguieta left, and Erickson is retiring after a stellar career at the bank), leaving only Maiuri, and potentially Eric Aboaf, the CFO who also has overall control of global markets, as contenders.

Whilst it is fun to speculate on why such a high-performing executive as Maiuri would decide to retire, that is for another day. What matters now is what happens next, after a critical piece of the Jenga puzzle has been removed. Maiuri had accumulated an enormous amount of power and influence (not to mention wealth: his total comp for 2022, according to the proxy statement, was over USD8m). Walking away from all that is a significant decision, but it also leaves a some potential – and some real – issues.

First, his role as COO. This has been filled by rising star Mostapha Tahiri, formerly head of Asia Pacific & MENA, who is currently based in Singapore. That, in itself, is something of a surprise: it had looked from the outside as if Ann Fogarty, global head of client delivery, was being groomed for that role. That said, Tahiri’s appointment leaves two major regional jobs to be filled (reportedly, Stefan Gmuer will stand in pro tem). That is quite apart from the fact that several senior posts remain unfilled, including a country head for Ireland, a head of alternative investment solutions after Paul Fleming’s departure – and a permanent head of digital, after Nadine Chakar left in January. Donna Milrod, chief product officer, has digital as part of her portfolio, reporting into Maiuri, and appointed Martine Bond, who is head of GlobalLink, an electronic trading platform, to take the digital brief on a temporary basis.

Digital is a clear weakness, with State Street well off the pace behind BNY Mellon. HSBC, BNP Paribas, and SGSS, inter alia. Earlier this year, State Street ended its deal with Copper, the crypto custody fintech, saying that it would work on “a multi-faceted solution for both tokenized securities as well as native tokens”. Sources suggest that it is substantially dialling back its commitment to the sector after evaluating client demand and the less than friendly regulatory environment.

Whilst O’Hanley will directly take on Maiuri’s responsibility for investment services, the bank’s largest business, this is unlikely to be a long-term solution. O’Hanley simply does not have enough hours in the day to run a G-SIB bank and directly manage its biggest unit.

But here’s the good news. First, this is nothing more than turbulence – rough air, as the airlines now call it – and it always passes. In the investment services business, State Street has an abundance of talent at all levels, and the senior management team is perfectly capable of adapting to change and using it to the bank’s advantage. Eric Aboaf, Donna Milrod, Joerg Ambrosius, John Plansky, Julia McCarthy, Jesse Cole, Jess Donohue, Tahiri & Fogarty, for example, as well as the O&T team that Maiuri largely built and the client-facing unit that Ambrosius is putting together – this is a high-powered bench that O’Hanley can rely on to innovate, deliver and execute.

Maiuri did pretty well in the corporate world for a guy who is, at heart, an entrepreneur – he co-founded Eagle Investment Systems – and, in his parting remarks, he strongly hinted that he would be returning to the fintech world. “In my next stage, I intend to explore the new opportunities being created by the confluence of technology and finance,” he said. Do not expect Mr Maiuri to go gentle into that good night. Equally, do not expect State Street to take long to recover its equilibrium.

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