ABA Banking Journal - November/December 2016 - 41


FEATURE

> INVESTOR RELATIONS

Who You
Gonna Call?

A proactive posture toward investor relations can help bank
management better engage with activist shareholders.
BY DEBRA COPE

I

nvestors betting on consolidation
as the best path to improve bank
performance have unleashed a
wave of shareholder activism at
banks. In 2015 alone, activists
launched 22 campaigns aimed at U.S.
banks both small and large, up from
eight in 2009, according to Thomson
Reuters activism data. And beyond
these formal campaigns, hedge fund
investing in banks continues to rise.
Usually, an activist shareholder is
seeking to shake things up. They
typically identify companies that are
underperforming, purchase a large
number of shares, and try to obtain
board seats in order to effect major
change. Activists argue they have
an ability to add value, and the data
seem to bear that out. On average,
activist shareholders create 130 basis
points of excess return above the
relevant S&P industry index, Bain and
Company partner Josh Hinkel told
American Banker earlier this year.
However, many bankers and banking
experts see activists as too willing to
trade long-term value for short-term
pricing. "In community banking,

Usually, an activist
shareholder is seeking
to shake things up.
They typically identify
companies that are
underperforming,
purchase a large
number of shares, and
try to obtain board seats
in order to effect major
change ... However,
many bankers and
banking experts see
activists as too willing
to trade long-term value
for short-term pricing.

activism is too often synonymous
with pressure to sell a bank," says
John Gorman, a partner with the
Washington, D.C., office of Luse
Gorman PC.
But not engaging with activists,
regardless of their goals, is one of
the biggest mistakes a bank can
make, Gorman and others added,
because they are first and foremost
shareholders. "Most banks aren't
prepared, and react in a defensive
or hostile way," says Dory Wiley,
president and CEO of Commerce
Street Holdings, a Dallas-based
investment banking firm. "This is the
absolute worst thing you can do."
"Shareholder activism in banks
tends to be a milder form than
in other sectors because of the
regulatory aspect," Wiley adds.
But, he continues, "Most activists
in banking have pretty legitimate
issues. Banking isn't rocket science,
so it isn't that hard to pinpoint
where management is making
mistakes and needs to improve.
More often than not, it is more of an
alignment issue."
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41


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Table of Contents for the Digital Edition of ABA Banking Journal - November/December 2016

Chairman’s View
Upfront
Picture This
Banking’s ‘Amazon Moment’
Special Report on Innovation and Technology
Building an ‘Internet of Value’
Do You Do What the Data Tell You?
Innovation in the Bank
Core Exercises
Cover Story Pillar of Her Community
Maintaining a Commitment to Ag Customers
Who You Gonna Call?
Anti-Money Laundering
Power Up Profile
Compliance ‘When Can I Call My Customer?’
Risk Management
ABA Compliance Center Inbox
From the States
Corporate Social Responsibility
Index of Advertisers
ABA Banking Journal - November/December 2016 - bellyband1
ABA Banking Journal - November/December 2016 - bellyband2
ABA Banking Journal - November/December 2016 - cover1
ABA Banking Journal - November/December 2016 - cover2
ABA Banking Journal - November/December 2016 - 3
ABA Banking Journal - November/December 2016 - 4
ABA Banking Journal - November/December 2016 - 5
ABA Banking Journal - November/December 2016 - 6
ABA Banking Journal - November/December 2016 - 7
ABA Banking Journal - November/December 2016 - Chairman’s View
ABA Banking Journal - November/December 2016 - 9
ABA Banking Journal - November/December 2016 - 10
ABA Banking Journal - November/December 2016 - Upfront
ABA Banking Journal - November/December 2016 - 12
ABA Banking Journal - November/December 2016 - 13
ABA Banking Journal - November/December 2016 - 14
ABA Banking Journal - November/December 2016 - 15
ABA Banking Journal - November/December 2016 - Picture This
ABA Banking Journal - November/December 2016 - 17
ABA Banking Journal - November/December 2016 - 18
ABA Banking Journal - November/December 2016 - 19
ABA Banking Journal - November/December 2016 - Special Report on Innovation and Technology
ABA Banking Journal - November/December 2016 - 21
ABA Banking Journal - November/December 2016 - 22
ABA Banking Journal - November/December 2016 - Building an ‘Internet of Value’
ABA Banking Journal - November/December 2016 - 24
ABA Banking Journal - November/December 2016 - 25
ABA Banking Journal - November/December 2016 - Do You Do What the Data Tell You?
ABA Banking Journal - November/December 2016 - 27
ABA Banking Journal - November/December 2016 - insert1
ABA Banking Journal - November/December 2016 - insert2
ABA Banking Journal - November/December 2016 - Innovation in the Bank
ABA Banking Journal - November/December 2016 - 29
ABA Banking Journal - November/December 2016 - 30
ABA Banking Journal - November/December 2016 - Core Exercises
ABA Banking Journal - November/December 2016 - Cover Story Pillar of Her Community
ABA Banking Journal - November/December 2016 - 33
ABA Banking Journal - November/December 2016 - 34
ABA Banking Journal - November/December 2016 - 35
ABA Banking Journal - November/December 2016 - 36
ABA Banking Journal - November/December 2016 - 37
ABA Banking Journal - November/December 2016 - Maintaining a Commitment to Ag Customers
ABA Banking Journal - November/December 2016 - 39
ABA Banking Journal - November/December 2016 - 40
ABA Banking Journal - November/December 2016 - Who You Gonna Call?
ABA Banking Journal - November/December 2016 - 42
ABA Banking Journal - November/December 2016 - 43
ABA Banking Journal - November/December 2016 - Anti-Money Laundering
ABA Banking Journal - November/December 2016 - 45
ABA Banking Journal - November/December 2016 - 46
ABA Banking Journal - November/December 2016 - Power Up Profile
ABA Banking Journal - November/December 2016 - 48
ABA Banking Journal - November/December 2016 - Compliance ‘When Can I Call My Customer?’
ABA Banking Journal - November/December 2016 - 50
ABA Banking Journal - November/December 2016 - Risk Management
ABA Banking Journal - November/December 2016 - ABA Compliance Center Inbox
ABA Banking Journal - November/December 2016 - 53
ABA Banking Journal - November/December 2016 - 54
ABA Banking Journal - November/December 2016 - From the States
ABA Banking Journal - November/December 2016 - 56
ABA Banking Journal - November/December 2016 - Corporate Social Responsibility
ABA Banking Journal - November/December 2016 - Index of Advertisers
ABA Banking Journal - November/December 2016 - cover3
ABA Banking Journal - November/December 2016 - cover4
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