Lehman Brothers Holdings Inc. (LEH), the fourth-biggest U.S. securities firm, on Tuesday announced certain management shake-ups, re-inducting Michael Gelband and Alex Kirk as global head of Capital Markets, and global head of Principal Investing, respectively, with immediate effect. The company also named Dave Goldfarb its chief strategy officer, while Gerald Donini has been named global head of Equities. Separately, Lehman announced two senior appointments to its Singapore office.
New York-based global investment bank said Gelband, Kirk and Donini will join the bank's Executive Committee, while Goldfarb will continue his membership in the Committee. Gelband, Kirk and Goldfarb will report to president and chief operating officer Herbert (Bart) McDade III, while Donini will report to Gelband.
Commenting on the new appointments, Richard Fuld, Jr., chairman and chief executive officer stated, "We are delighted to welcome Mike and Alex back to the Firm. Mike and Alex brought deep expertise, client focus and uncompromising integrity to the senior leadership positions they held in the Fixed Income division and are well suited to lead the Firm forward and deliver operational excellence."
Long-term loyalist Gelband, 49, left Lehman in 2007 to 'pursue other interests.' However, the Street speculated that the departure was in part due to philosophical differences with the company's senior management regarding the running of the fixed-income unit, where he was the global head since 2005.
Gelband, who joined the bank in 1983, will now head the Capital Markets division, which recently reported negative net revenues of $2.4 billion in its second quarter, compared to revenues of $3.6 billion in fiscal 2007.
Alix Kirk, 48, served as the co-chief operating officer for the fixed-income department and head of global credit products, before he left the firm in early 2008. He had held several main roles in Lehman's Fixed Income division since 1994. Revenue from Principal transactions in the second quarter was a negative $3.53 million, compared to revenues of $2.89 billion in the previous year.
Recently, Ian Lowitt replaced Erin Callan, who was chief financial officer since December 2007, while Callan was demoted to the company's Investment Banking Division in a senior capacity. Further, current president and chief operating officer McDade III succeeded longtime President and Chief Operating Officer Joe Gregory.
Lehman has been facing steep losses related to the credit crisis and a slumping share price for some time now, and a lack of confidence in Lehman's leadership has been plaguing the company. The dismal performance in the recent second quarter added to the woes of the company, which has been under intense pressure of late, particularly from short seller David Einhorn of Greenlight Capital, who has been criticizing the bank's financial health and its public disclosures.
The company very recently reported a second quarter net loss of $2.8 billion or $5.14 per share, as expected, compared to a prior year profit of $1.3 billion or $2.21 per share. The first-ever loss in its history as a public company was due to negative mark-to-market adjustments and hedging losses. Lehman reported negative net revenues of $0.7 billion, a sharp decline from revenues of $5.5 billion in the prior-year quarter, as interest expense exceeded total revenues. In order to strengthen its capital base, the company also raised $6 billion in capital.
The sub-prime sector collapse and the credit crunch have hurt financial firms badly, with companies writing down over $300 billion of bad investments stemming from bad bets on mortgage-backed securities, which in turn resulted in top-level executive changes in many players in the sector.
The former CEO of Merrill Lynch (MER), Stanley O'Neal, the former CEO of Citigroup (C), Charles Prince, and Morgan Stanley (MS) Co-President Zoe Cruz were among the high-profile victims of the US subprime crisis.
Lehman's new chief strategy officer Goldfarb, 51, was most recently the global head of Strategic Partnerships, Principal Investing and Risk, a position he has held since 2006. Goldfarb, who joined Lehman in 1993, was chief administrative officer from 2004 to 2006, and served as chief financial officer from 2000 to 2004.
Meanwhile, Donini's, 44, recent position was the head of Americas Equities. He joined Lehman in 1998 as head of U.S. Derivatives Trading, and from 2000 to 2004 was head of Global Derivatives Trading and served as head of U.S. Equity Trading from 2004 to 2007.
Separately, Lehman announced the appointment of Jit Soon Lim as head of Equity Research, Singapore and Southeast Asia, and Simon Flint as head of FX Strategy, Asia-Pacific Ex-Japan. Lim will be responsible for a team of research analysts, and report to Kent Chan, deputy co-head of Equity Research, Asia-Pacific ex-Japan, while Flint will report locally to Hua He, head of Equity and Fixed Income Research, Asia-Pacific, and globally to Jim McCormick, global head of FX Strategy.
LEH closed its trading on Tuesday at $24.35, up $1.55 or 6.80%, on a volume of 38.4 million shares. The stock has been trading in a broad range of $20.25 - $76.99 for the past 52 weeks.
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