Thain difference

22 October 2015 By Antony Currie

John Thain is blazing a trail for General Electric’s Jeffrey Immelt. The boss of CIT, which has $65 billion in assets, announced on Wednesday that he is stepping down in March after what will by then be six years in the job. His decision comes just after he turned his erstwhile GE Capital wannabe from an existentially challenged shadow lender into a bank. A big reorganization offers a good chance for a graceful exit.

GE Chief Executive Immelt is right in the middle of one. He’s taking the conglomerate in a direction opposite to CIT’s, having announced in April that he would sell most of GE’s finance unit. That’s because the division’s sheer size – it had $363 billion of assets at the end of last year, plus $136 billion of cash and liquidity – meant the whole company would be regulated as a lender and would need higher capital and earn lower returns.

The goal is to have at most $85 billion of financial assets left. More than 90 percent of earnings will then come from GE’s industrial business, up from 58 percent last year.

Thain’s restructuring task is largely done. He has already received regulatory approval to buy OneWest Bank, a $3.4 billion deal he struck in July 2014. That has boosted CIT’s deposit base to just under 60 percent of its funding. Plans to consider “strategic alternatives” for its $10 billion commercial air business as well as its Canadian and Chinese operations will free capital and reduce reliance on wholesale funding even more.

Completing a major overhaul is an apt time to relinquish the reins – in Thain’s case, to board member Ellen Alemany, a former RBS Americas CEO and Citigroup executive.

Immelt isn’t yet at a similar juncture. GE is roughly half way through selling the finance unit’s assets and may complete the task before the 2018 deadline, but not by much.

The CEO will by then have been in charge for 17 years. Shareholders have not so far had much to cheer about during his tenure. Returning GE to its industrial roots and paving the way for his successor may become his best achievements. Thain offers a model for bowing out.

 

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