MNC Financial Inc. is planning to lay off about 1,000 employees under a scenario prepared by the banking company to save as much $50 million over the next year, according to knowledgeable sources within MNC.
The latest round of employee reductions comes in addition to the loss of more than 1,200 jobs that accompanied the merger of MNC and Equitable Bancorporation earlier this year. MNC, which owns Maryland National Bank and Washington-based American Security Bank, has nearly 14,000 employees.
Bank executives hastened to point out that the move, though likely, is part of a much larger reorganization in which most of the details have yet to be settled. They said that hiring in a few areas of the company would offset some of the impact the layoffs would have on the company's total employment level.
"There is a plan [for layoffs], but it's just one piece" of the reorganization, said one executive in a position to know. "It's not a complete picture. The truth of the matter is, over here there's a plan, over here there is normal attrition, over here is hiring. We have lots of things to do."
But other sources said that hiring under way in certain areas, including a profitable credit card division in Delaware and a unit dealing with troubled real estate loans, would be of little benefit to most employees who are untrained for such jobs.
In all, the total number of positions that could be abolished, some unfilled and some through attrition, could be closer to 1,300, according to two sources inside the company.
Daniel G. Finney, an MNC spokesman, declined to comment directly when asked about the layoffs.
"MNC is still in the planning stages in its restructuring efforts," he said, "and once a clear sense of direction and the specific initiatives have See MNC, 8A, Col. 1MNC, from 1Cbeen developed, as usual, the company would certainly conduct a comprehensive internal employee communications effort."
The expected move, part of a cost-savings plan to be implemented throughout the coming year, is aimed at saving the company between $40 million and $50 million, sources said. One source who was involved in the planning placed the target between $48 million and $50 million.
The effort is an attempt to save the company money at a time when income from its real estate lending operation has dried up in the wake of the slumping real estate industry.
A combination of regulatory pressures resulting in a virtual cessation of new commercial real estate lending and losses brought on by a spate of bad loans during the second quarter has meant that MNC has seen any income from its real estate division more than disappear.
Last year, real estate lending accounted for 19 percent, or about $41 million, of MNC's total net income. Regional giant MNC, with $27.5 billion in assets, lost $74.7 million for the quarter ended June 30 after seeing many of the loans turn sour.
After completing its merger with Equitable this summer, the company announced to employees in late August that it would begin a massive reorganization to combine those operations in the various parts of the company that were similar. The company had previously been structured along its discreet banking units and other subsidiaries.
At that time, the company said it would begin exploring "expense reduction initiatives" that MNC sources confirmed meant planned -- but an undetermined number of -- layoffs.
Told about the additional layoffs yesterday, Kyle Prechtl Legg, a banking analyst with Alex. Brown Inc. in Baltimore, said she was not surprised given the size of the company and current $H economic conditions.
"Yes, it certainly does" make sense, she said. "That's one of the reasons they're doing the restructuring along functional lines. If it's done right, you can drive the same amount of business through a lesser overhead. Banks have typically employed too many people."
In addition to the layoffs, "major savings" are expected to be gained by bringing American Security's computers at the branch level into the same system used by Maryland National and adopted by Equitable during the merger.
Further savings are also expected by integrating the way other HTC computer systems are applied and the manner in which documents and other material is processed within the banking company, sources said.
The size of the layoffs under discussion does not include the 300 or so employees working for the three non-banking divisions -- MNC Commercial Division, MNC Leasing Division and Leasefirst--that are currently being shopped for sale.