WITH CEO OFF TO FIX CREDIT CARDS, CHAIRMAN’S BACK IN PICTURE: BANK ONE COMMAND SPLIT IN TWO

Verne Istock is back in the saddle at struggling Bank One Corp.

The big Chicago bank has turned to the conservative, unflappable Mr. Istock to run most of its commercial and consumer banking units — which are relatively healthy — while CEO John McCoy concentrates on fixing the company’s battered credit-card business.

To analysts, the implication is clear: If Mr. McCoy can’t fix credit cards, he just might be asked to leave the bank his family has run for generations.

“I think the board is really saying that these two guys are now ultimately accountable for how their respective businesses run, and more specifically McCoy on the credit cards,” says Chris Bamman, banking analyst at Advest Inc. of Stamford, Conn.

Says Michael Moran, bank stock analyst in Detroit with Raymond James & Co. : “My interpretation is that the board is saying, ‘John McCoy, you bought First USA two years ago. It is now screwed up. You fix it. And you don’t get that long of a lifeline these days. Either you perform or you step aside.’”

InvestmentNews sister publication Crain’s Chicago Business quotes unnamed sources within Bank One as saying the board prompted Mr. Istock’s return to day-to-day management and Mr. McCoy’s concentration on credit cards.

As for Mr. Istock, Mr. Bamman says, “I certainly think his responsibility has increased.”

off to one side

Before last month’s shakeup, Mr. Istock was Bank One’s non-executive chairman and had been out of the limelight for a year, since Bank One’s takeover of First Chicago NBD Corp.

Bank One wouldn’t make Mr. Istock available for an interview.

Mr. Bamman and other analysts welcome Mr. Istock’s return.

“I think Verne’s skill set is critically important for Bank One these days — the customer focus, the focus on execution,” says Joseph Duwan, bank stock analyst at Keefe Bruyette & Woods Inc. in New York.

“I view it as a positive,” says Bradley Vander Ploeg, banking analyst at the Chicago office of Charlotte, N.C.-based First Union Securities Inc. “I’ve always viewed him as a good operational leader, and hopefully he will keep his part of the company in order while the other guys are off fixing the other parts of the company that need to be fixed.”

Other consequences of the shakeup: Richard Vague, 42, Bank One executive vice president and head of First USA, left the company.

Also gone is Donald Winkler, 51, head of Finance One, the bank’s Columbus, Ohio-based auto finance company, also an executive vice president. Mr. Winkler is believed to be a leading candidate to replace Philippe Paillart as chairman of Ford Motor Credit Co., according to Automotive News, another sister publication of InvestmentNews.

One vice chairman, David Vitale, 53, officially retired last week, and the other, Richard Lehmann, 55, retires this month. They won’t be replaced; Mr. Vague was replaced with Mr. McCoy’s longtime merger specialist, William Boardman, 58.

The shakeup has led some observers to wonder whether Bank One’s current team has the depth to deal with its problems.

“Bank One doesn’t have enough bench to accommodate this change,” says Peter Crist, a Chicago-based executive recruiter. “They’ve created a very complex model with a lot of moving parts. It requires some very high-level human talent — and a lot of it.”

“You have to wonder if this is in the best interest of shareholders — having the people who’ve made major mistakes continue at the head of the bank and the tier behind them resign,” says David Dreman, chairman and chief investment officer of Dreman Value Management LLC, a New Jersey money manager that holds about 6.5 million Bank One shares.

Credit cards provide around 50% of Bank One’s revenues, Mr. Vander Ploeg says, and its First USA credit card business is plagued by service woes and angry customers.

It lost 1.1 million customers in the third quarter, Bank One CFO Robert Rosholt told analysts and investors last month in a conference call.

First USA fell from 65.6 million members on June 30 to 64.5 million on Sept. 30, Mr. Rosholt said, adding that accounts serviced by third-party vendors have been brought back in-house to a new center in Las Vegas, Nev.

Responds Mr. Bamman: “They’re saying all the right things, but now it’s a matter of time and execution.”

Mr. Rosholt downplayed any chance of Bank One’s quitting the credit card business. The rest of the bank, meanwhile, is relatively healthy, analysts say.

Its stock has plunged from $63 a share in mid-May to about $35 a share at midweek.

Crain News Service