H. Furlong Baldwin, a towering figure in Maryland's banking industry and one of the most influential business leaders in Baltimore, said yesterday that he will step down next month as president and chief executive of Mercantile Bankshares Corp., a position he has held for 25 years.
Named to replace him was Edward J. Kelly III, a top investment banker at J.P. Morgan Chase & Co. and head of its Global Financial Institutions group. He will take over March 1. Kelly, 47, also will become chairman and CEO of the company's lead bank, Mercantile-Safe Deposit and Trust Co.
J. Marshall Reid will continue as president and chief operating officer of Mercantile-Safe.
Although Baldwin will relinquish day-to-day duties, he will remain chairman of the company for at least three years.
"This is very emotional," Baldwin said in an interview yesterday. "I have been here a long time, but it is also exciting. I am sure this is the guy who will continue the Mercantile tradition."
Baldwin, who is 69 and widely known as "Baldy," postponed retirement for four years as he searched for a successor to head the state's largest independent banking company.
Yesterday, he introduced Kelly to employees in an emotional meeting at Mercantile's downtown headquarters. The two also met with directors.
Kelly "has just got a wealth of experience and connections and youth," said Donald J. Shepard, a Mercantile director and chairman and CEO of insurer Aegon USA Inc. "I think he will carry on the great things Baldy has done."
Morris W. Offit, a director emeritus of the bank who also attended the meeting, said Kelly "was handcrafted for this position."
"As I said at the meeting this morning, this is Baldy's finest hour," Offit said. "Management has two roles, not only in day-to-day execution and leadership, but to wisely choose your successor."
As Baldwin's successor, Kelly will head a banking company with $8.9 billion in assets that operates 21 separate banks with 194 branches in Maryland, Virginia, Delaware and Pennsylvania.
It also has a reservoir of capital, a growing trust department and few bad loans on its books. Like J.P. Morgan, which caters to the wealthy, Mercantile has a reputation for doing business with Baltimore's elite.
In selecting Kelly, Baldwin turned not only to someone from a similar bank but also to a fellow Princeton University graduate. But while Baldwin is a banker through and through and has been at Mercantile since 1956, Kelly, with a law degree from the University of Virginia, has spent most of his career as an attorney.
He joined J.P. Morgan in 1994 as general counsel, and before that was a partner at Davis Polk & Wardell in the Washington office, where he specialized in mergers and acquisitions, securities issues and regulatory matters facing financial institutions.
He got into the banking side of the business in early 1996, becoming head of Morgan's Global Financial Institutions group a year ago. He was heavily involved in putting together Morgan's blockbuster $39 billion merger with Chase Manhattan Corp. last September, which created a banking company with $660 billion in assets.
"He has the leadership qualities to be a star as a CEO of a bank," said Michael Patterson, vice chairman of J.P. Morgan Chase. "He is as smart as anybody I know."
Frank P. Bramble, chairman of Baltimore-based Allfirst Financial Inc., said he has known Kelly since about 1990. "He is going to be a fierce competitor," he said. "He is a terrific choice."
Industry analysts were also impressed with Kelly's credentials.
"This is someone who can take Mercantile to a new level," said Gerard Cassidy, a bank analyst at Boston-based Tucker Anthony Sutro Capital Markets.
Kelly, in an interview, said one of his goals is to make sure Wall Street hears Mercantile's story. A broader exposure could mean more investors and a higher stock price.
Although Mercantile's shares rose 35 percent last year, topping out at $44.69 on Dec. 27 , they have since dropped back, closing at $39.81 yesterday, giving it a market value of $2.8 billion.
"I am not sure the market has rewarded [the bank] as much as it should," he said.
He also plans to increase Mercantile's size through "sensible" acquisitions.
"I think there is huge opportunity within 100 miles of Baltimore, maybe 150 miles max," he said. "What I would really like to do over time is to continue to build on the platform that has been developed and not change the fundamentals."
Kelly, who has known Baldwin for four years, said he decided to take the job partly because J.P. Morgan became so large after the merger. He said he had other options, including retiring or teaching law school.
But he and Baldwin kept talking over the past two years until Kelly decided to take the job.
"He sold me," Kelly said. "He did a great job. He worked on me for a long time."
Kelly, who is married and has three children, plans to move to Baltimore Feb. 28 and bring his family here this summer.