Wells Fargo Eliminating 7% More Jobs Than Forecast

Job cuts resulting from Wells Fargo & Co.'s purchase of First Interstate Bancorp will exceed analysts' initial forecasts by at least 7%, according to a filing with the Securities and Exchange Commission.

A total of at least 10,800 positions will be eliminated by the third quarter of 1997.

The reductions mean a 24% decrease in the combined companies' April 1 work force of 45,800.

Wells officials refused to say how many people would actually lose their jobs as a result of the reduction. Some positions may be eliminated through attrition, they said.

When the hostile takeover was first launched in October 1995, analysts predicted total layoffs would equal between 15% and 17% of the combined company's staff.

But the new numbers handily surpass those projections.

Lorna Doubet, a Wells spokeswoman, said the bank never made any estimates about job eliminations scheduled for 1997.

All Wells had said is that the bank expected about 7,200 reductions by the end of 1996, she pointed out. That number still stands, she added.

"We hadn't gone beyond 1996 before," said Ms. Doubet. "I don't know if anybody has a crystal ball that instantly can project out 18 months. It's an inexact science, and we're making estimates as we go along."

The bank projected at the time of the close of the First Interstate deal last April that the integration process would take about 18 months to complete, and end on Sept. 30 of next year.

Wells officials would not say if the merger-related cuts would cease at that time.

The SEC filing, a 10Q report of third-quarter earnings, states that Wells "expects to have fewer than 35,000 active full-time equivalent positions by the third quarter of 1997," which leaves the door open for even more job reductions.

While analysts acknowledged that the job cuts are on the high end of what can typically be expected in the merger of two large banks with overlapping markets, they said they did not expect the move would have any negative implications for Wells.

"Yes, it's a big number, but it's reasonable given the market nature of the merger," said Joseph K. Morford III, a banking analyst with Alex. Brown & Sons. "It's an in-state, in-market merger, and there tends to be higher staff cuts in such mergers."

The cuts may also be deeper compared with other deals of this size because of Wells Fargo's on-going strategy of closing traditional branches in favor of in-store branches.

Wells Fargo has shuttered or sold off about 330 of First Interstate's 400 traditional branches in California to date, and it plans to sell another 32 brick and mortar branches by the end of February, Ms. Doubet said.

In their stead, Wells is erecting banking centers or full branches in supermarkets at the rate of about 150 in the state so far this year, she said.

"In most mergers you only have the overlap to deal with," said Ray Soifer, banking analyst with Brown Brothers Harriman & Co. "But here you have a reconfiguration going on as well."

The in-store banking centers have, on average, 1.8 full-time employees, while the in-store branches have about four. Traditional branches employ about a dozen, he said.

Not all the employees being laid off are from First Interstate. About 19% of the staff reductions to date have come from the Wells Fargo work force, Ms. Doubet said. The bulk of those cuts have fallen in both the San Francisco and Los Angeles metropolitan areas, where the two banks had the most overlap, she said.

Ms. Doubet also noted that some of the affected employees will be relocated to other positions.

Analysts described Wells Fargo's severance packages as generous. Employees receive four weeks of pay and benefits for each year of employment for up to two years. Higher-level managers can receive one- or two-year packages, she said.

The bank spent $10 million on severance in the third quarter and $27 million in the second, Ms. Doubet added.

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