Texas Capital CEO Rob Holmes in his first 100 days of trying to turn around Texas’ 9th largest bank
Less than a year ago, Rob Holmes was a senior executive at JPMorgan Chase in Dallas and had no plans to change careers. In August, he agreed to an hour-long conversation with a Texas Capital Bank headhunter. It turned into three hours.
Two months later, he was the new CEO of a Dallas-based bank with $ 40 billion in assets, although he hadn’t paid much attention to it before as he was used to looking at global markets. .
“The opportunity to come to a bank with enough size, scale, history and talent to be relevant, but also with a long trail ahead of it where we could actually build Texas flagship bank, was very appealing. “said Holmes in an interview with The morning news from Dallas.
Holmes replaced Larry L. Helm, who took office after the departure of longtime CEO Keith Cargill when a $ 5.5 billion merger with the independent McKinney-based bank collapsed in the summer. latest.
Holmes, from Dallas, said he was excited to be working closer to home.
“At first I was like, ‘Why the hell would I quit a job running a company bigger than Texas Capital at maybe the best financial services company in the world and do it?’ But the reason was that my impact could be much greater for all voters here than it could have been at JPMorgan, ”said Holmes.
The 23-year-old first non-founding CEO of the bank didn’t water down his thoughts on the bank’s position when he joined the team. On his last call for results, he described the mark as “bruised”. But Holmes believes his honesty is part of the reason he was hired.
“I think the council wanted someone [who] was frank in their assessment, lucid about the opportunities and had already done so, ”he said.
Holmes said there was never any question he had the experience for the job. He was Global Head of Corporate and Specialty Banking at JPMorgan since 2011. Previously, he was Co-Head of JPMorgan’s North American Retail Industries Investment Banking Practice and Head of Investment Banking Services for the southern region of the United States.
The question was whether he understood where Texas Capital could go.
Before accepting the job, Holmes studied the bank’s balance sheet and income statement and spoke to CEOs in and around Texas to get their perspective on the bank and its potential. By the time Holmes started the new contract in January, he knew what he wanted to do to make Texas Ninth Bank the state’s premier bank.
“We made a list of what we needed to do and got started quickly,” he said.
In the first week, Holmes implemented quarterly business reviews, which the bank had never done before. This means that each line of business is accountable to the management team to review any issues it faces.
“Once you go through a quarterly activity review, the entire management team is aware of the issues we are facing and we have reorganized ourselves around them,” said Holmes.
After three weeks of work, Holmes helped the bank – which recorded just over $ 1 billion in revenue for 2020 – raise $ 300 million in capital by selling preferred stock. This is the largest capital increase in the bank’s history, Holmes said.
“I would say that after what the bank went through in 2020, it was imperative to recapitalize the bank so that we could go on the offensive,” he said.
Three or four weeks later, the bank issued a credit-linked note in the amount of $ 275 million.
“It was really great to do because it was more capital, but it was also a diverse source of funding,” he said. “We were the first regional bank in the country to use this structure. “
Texas Capital then sold management rights for $ 14 billion in mortgages and decided to end its correspondent lending business in which a lender will offer a home buyer unqualified mortgages to help them get approval for a loan to buy a home.
“These businesses are much more valuable to a business with a large consumer footprint, which we didn’t have,” he said. “In addition, by getting rid of these companies, we have reduced the volatility of our earnings and removed the risks from the operating model. “
For the first quarter, Texas Capital reported profit of $ 80 million, an increase of about $ 89 million from the same quarter a year ago.
Holmes completed his trade moves in the first 100 days by pricing a $ 375 million subscribed public offering in subordinated notes.
So far, the bank’s capital position has improved by 270 basis points this year, Holmes said.
“Today, the bank is better capitalized and in a better financial situation than it has ever been in its history,” he said.
New roles, new recruits
Holmes, who had a 31-year career with JPMorgan Chase, also didn’t hesitate to recruit a new management team. Since January, he has created three new roles within the company, all of which have been filled: director of human resources, director of investment banking and director of treasury services.
He also hired a new chief risk officer, Tim Storms, who previously held the same role for the real estate operations of commercial bank JPMorgan. The new head of treasury services, Nancy McDonnell, also worked at JPMorgan until her retirement in 2020, as global head of commercial bank treasury and security services and other senior client roles..
“The common theme is hiring talent, which I don’t think a regional bank can compare to,” Holmes said. “These people have all had much bigger and more complex jobs and have been very successful. And so we recruit for what the bank can be, not for what it is today.
The bank also recently announced its latest lineup of hires: a senior director of diversity, equity and inclusion, chief information officer and president of mortgage finance.
Holmes also implemented a junior program for the first time at the bank. This has led to 55 new hires, who will work from August to December. The bank has a total of 1,628 employees.
“I’m as excited about this as anything I’ve done,” he said. “I think that was the biggest failure of this bank – not investing in young talent. I think it will be a huge dividend in every way as we move forward, in the short term and in the long term. “
The next 100 days
“Now we’re going on the offensive,” Holmes said of the bank’s next 100 days.
The bank will also be making a lot of investments over the next three months. He plans to re-subscribe all of his technology investments as well as other high value and high value investments.
The bank will also look for gaps in its products and services, as well as markets it does not cover but should cover, he said. He will decide if he is in the right segments and if he has the right tolerance for risk. It will decide which platforms to upgrade and which to buy new ones. It will reduce its number of suppliers. And it will add staff and improve employee benefits and training.
“And if you’re doing well, this could be a pretty special place,” Holmes said. “And remember it’s in the best economy in the world.”
Those next decisions will culminate in the third quarter when Holmes releases a report on the gaps found by the bank in its valuation, he said.
Holmes said that with his background there was never any question that he had the expertise to do this job. But that doesn’t mean he doesn’t feel the pressure as he strives to turn Texas Capital back into a state with the most banks in the United States.
“I would be lying if I said I didn’t feel the pressure,” Holmes said. “We have over 1,800 employees who rely on the operations committee to make the right decision every time. And our customers too.