Chase Manhattan to cut 4,500 jobs, fire 2,200 Second round of layoffs for largest U.S. bank

dividend up, stock split

Banking

March 18, 1998|By BLOOMBERG NEWS

NEW YORK -- Chase Manhattan Corp., the biggest U.S. bank, said yesterday that it will cut 4,500 jobs, or 6.5 percent of its staff, to reduce costs and invest in more profitable businesses.

The bank will take a $320 million charge in the first quarter to pay for the cuts -- its second round of firings since the 1996 merger of Chase and Chemical Banking Corp. Chase expects to save $460 million annually.

Chase will fire about 2,200 employees, said President Thomas Labrecque. The rest of the cuts will come from leaving vacant positions unfilled. About half the cuts will come in New York, New Jersey and Connecticut.

"They've been criticized because expenses were growing faster than revenues," said Thomas Hanley, an analyst at UBS Securities. "The knife cut deeper than I thought."

Chase shares rose $6.6875 to close at $135 yesterday. The bank also said it will increase its quarterly dividend by 16 percent to 72 cents and split the stock 2 for 1.

The cuts are part of Chase's goal to increase revenue 10 percent a year and return at least 18 percent on shareholders' equity, Labrecque said.

Chase will use some of the savings to hire in corporate banking, the national consumer business, and in Chase Technology Services, which includes global cash management.

"Those businesses are growing at 8 percent a year, and we have a need to continue to leverage the market positions we have," Labrecque said.

Chase also plans to continue to build its mortgage servicing business, credit cards, and online banking, Labrecque said.

Other banks, including Citicorp, are cutting staff and costs to devote more money to businesses that are growing faster.

Labrecque said he was confident the bank will meet analysts' earnings estimates. "There's no reason to believe we can't achieve our plans," he said. "There's no reason at this point to adjust our plans for the year."

Chase is expected to earn $2.28 a share in the first quarter and $9.60 for the full year, according to a survey of analysts by IBES International Inc. Analysts said the cuts show banks can't afford waste at a time when competition is increasing in the financial services industry.

Pub Date: 3/18/98

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