MNC Financial Inc. has revived a plan to lay off hundreds of workers, sell various businesses and shrink the size of the banking company as it pushes to cut expenses by an additional $100 million a year, according to an internal memo distributed within the company yesterday.
The state's largest banking company, parent of Maryland National Bank and American Security Bank, said that the moves were aimed at trimming costs 15 percent while shedding between $3 billion and $5 billion in assets.
Overall, the push is meant to refocus MNC once again on its core Baltimore and Washington markets --where it remains dominant -- and squeeze the company back to profitability.
While the planned layoffs are expected to reach well into the hundreds, exact figures will not be known for some time, Frank P. Bramble, MNC's chief operating officer, said in an interview yesterday afternoon.
"We don't know how many people, but it will be a significant reduction of force because we're driven by salary expenses," he said. "The fact of the matter is it's going to be substantial."
Mr. Bramble added that he did not expect the layoffs to occur in one fell swoop and said that, though the bulk would probably take place within the next 90 days, many would not happen until later in the year.
MNC, which has nearly $20 billion in assets, has about 10,000 employees and operates 250 branches throughout Maryland, Washington and Northern Virginia.
David S. Penn, a banking analyst with Legg Mason Inc. in Baltimore, said, "Given the results in the first quarter and given the fact that they're clearly downsizing the bank, they have to concentrate on the expenses, because that's the one variable they can control."
Many of the steps outlined in yesterday's memo were originally slated to occur late last fall. A scenario then under consideration would have resulted in as many as 1,000 positions being cut.
That program was delayed, however, when even more pressing financial problems surfaced, including a severe cash crunch and an avalanche of bad real estate loans that threatened the survival of the then-$27 billion company. MNC decided to wait until the sale of its credit-card division was complete and the resulting size of the company became evident before beginning the restructuring project anew, Mr. Bramble said.
"Six to seven months ago -- considering all we've been through, that's a helluva long time ago," he said. "It seems like five years."
The memo circulated yesterday summarized a meeting that Mr. Bramble held with 80 of MNC's senior executives Tuesday night. His goal, he said, was to introduce the company's top executives to a renewed effort to focus MNC's operations on its core retail and commercial markets.
As a result, he said, the company would be seeking to "dramatically cut back" some of its internal operations -- possibly by hiring outside contractors -- and to trim various other expenses in an effort to better match the company's costs with )) the much smaller banking company it has become.
While the specifics of the plan are not expected to be complete until the end of this month, the company is attempting to "stop any activities that do not have a direct positive impact" on MNC's local core business, Mr. Bramble said.
"This was a large multi-regional company that was spread everywhere," he said. "And we're changing that and dramatically changing what the company is."
Although MNC reported a hefty $154 million profit during the first quarter, it was primarily thanks to the sale of its prized credit-card division, now MBNA Corp. The sale generated $444 million in profits for MNC. Without the sale, MNC would have lost about as much as it earned during the period.
Though MNC said the growth in its troubled loans has slowed, "the economic outlook combined with lower interest income and the high level of non-performing loans" will continue to hurt earnings next year and beyond, the memo said.
MNC at a glance
MNC Financial Inc.
* Maryland National Bank
* American Security Bank
* Va. Federal Savings Bank
Assets: $20 billion
Loans: $12.4 billion
Deposits: $15.6 billion
1st quarter profit: $154 million*
Closing stock price 5/1: $5.125
Shares outstanding: 87 million
* Includes pre-tax profit of $444 million from sale of credit card unit.