KeyCorp to eliminate 3,000 jobs

Cleveland bank, No. 11 in country, seeks to bolster profit


November 24, 1999|By BLOOMBERG NEWS

CLEVELAND -- KeyCorp said yesterday that it will cut 3,000 positions, or 11 percent of its jobs, in a restructuring aimed at boosting profit at the 11th-largest U.S. bank.

The Cleveland-based bank expects to complete the cuts by the end of 2000. Combined with other cost-saving measures, KeyCorp said the restructuring will save the bank $170 million a year before taxes by 2002.

A KeyCorp spokesman would not say where the bank is cutting jobs. He said some reductions would come through attrition over the next year.

KeyCorp is struggling to meet profit goals as a series of acquisitions has not delivered the earnings the bank expected and rising interest rates hurt loan income. Its stock is down 20 percent this year, lagging behind the 6 percent slump of regional banks in Standard & Poor's 500 index. The S&P 500 is up 15 percent.

KeyCorp's shares fell 48.4375 cents to $25.6875 yesterday.

"They've had a number of challenges growing the revenue side, and this in part means they're making sure they focus on their expenses," said Lisa Welch, a bank analyst at John Hancock Advisers, which oversees more than $10 billion in shares of financial companies, including KeyCorp.

KeyCorp's third-quarter profit fell short of expectations, in part because of higher personnel costs and shrinking margins on what it makes on loans. That caused some analysts to cut their ratings on the bank. Of the 21 analysts following the company, 17 rate the stock a "hold" while four rate it a "buy."

To pay for the changes, the bank will take a fourth-quarter, pretax charge of as much as $180 million. That will be offset by a separate pretax gain of about $190 million from the sale of the company's Long Island retail banking business, completed last month.

In addition to firing workers, KeyCorp said it might sell its credit-card business, which has not been growing. In the past year, its credit-card loans shrank 10 percent to $1.3 billion.

While the company did not assign a price to the proposed sale, the card business could fetch about $220 million, based on the average paid for other credit-card portfolios. Similar portfolios have sold this year at an average premium of more than 16 percent above the value of the loans.

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