Half of all bank CEOs within the KBW Bank Index are older than 65, up from fewer than 20% two decades ago, according to a Truist Securities report published Monday and seen by Banking Dive.
The median age of bank CEOs has increased by 10 years since the early 2000s, alongside a similar median age increase across corporate America leadership overall, according to a working paper published in April. Still, bank CEOs “tend to be older on average,” Truist Securities Managing Director John McDonald wrote, alongside associates Peter Nicolo and John Manahan.
It’s in part because financial sector CEOs have some of the longest tenures among all sectors – nine years, versus 5.4 in the energy sector and six in consumer, according to CristKolder Associates.
There are clear advantages of older CEOs, McDonald’s team wrote.
“[L]eadership continuity can foster consistent strategy, ensuring the franchise is aligned around specific long-term goals or targets over time,” they wrote. “Culture remains intact, aiding talent retention and recruitment. Experience managing risk across cycles also helps to build institutional expertise.”
But so, too, are there disadvantages. For one thing, the bank’s talent bench may take a hit if other promising executives seeking upward mobility leave the company when a CEO seeks to remain for “a few more years.”
“Strategy and culture may become stale over time without continual incorporation of fresh perspectives and challenge from new ideas,” McDonald’s team wrote. “Complacency and stagnation may reduce the sense of urgency for the organization to improve or to achieve best-in-class objectives/targets.”
At the top five U.S. banks, JPMorgan Chase CEO Jamie Dimon and Bank of America CEO Brian Moynihan are the oldest CEOs, at 70 and 66, respectively. They’ve been at the helm longer than average, at 20 years for Dimon and 16 for Moynihan.
McDonald notes that there is little to no correlation between bank CEO tenure and relative share price performance to the market over time. He also notes that despite investor misconception, CEO age is a poor predictor for mergers and acquisitions.
“A common screen that investors run to evaluate which banks are likely to sell is CEO age vs. the amount of their change in control payout,” McDonald wrote. “The idea is that older CEOs wanting to retire have even more incentive to sell when there's a large individual payout attached to the event.”
Over the past 20 years, CEOs selling banks “have actually tended to have comparatively younger CEOs,” the Truist researchers wrote.
