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Market Update

Bank One Shares Bounce as CEO Steps Down

McCoy's departure should lead to a restructuring or a sale.

Under pressure from investors, Bank One (ONE) said today that chairman and CEO John McCoy, 56, has retired. Verne Istock, Bank One's president, will serve as acting chief executive until a permanent CEO is named.

McCoy, whose grandfather founded the company more than 30 years ago, was the focus of harsh criticism this year after the company twice warned that it would miss analysts' earnings estimates. The income shortfalls were primarily the result of problems in Bank One's credit-card unit, First USA.

McCoy's departure is welcome news to shareholders, who have watched the stock dip 39% so far this year. Bank One's shares gained about 10% in the hour following the company's announcement.

Now that McCoy has left the company, Wall Street may be more receptive to a restructuring plan. Bank One still needs to clean up First USA, which is bending under pressure from aggressive credit-card competitors. The company also has to re-evaluate, its expensive stand-alone Internet bank, which has failed to attract a sizable customer base.

As a restructuring alternative, Bank One's board may sell the company--a decision that may have been difficult for McCoy to make because of his family legacy. Bank One is lean on leadership talent after a rash of firings this fall, and it may not be able to resurrect itself without a merger partner.

Whatever the outcome, Bank One appears to be rid of its leadership-credibility problem. That bodes well for shareholders. Either Bank One will re-form itself into a higher-performing bank, or it will sell out to a stronger company. Either way, shareholders should see some strong long-term rewards.