BankBoston Corp. said Tuesday that a reengineering assessment it launched last fall will result in 114 staff layoffs by the end of 1998 and a redeployment of "millions" in cost savings to new technologies and employee training.
BankBoston said its goal is to improve customer service-and hence satisfaction and retention rates-by streamlining internal functions and eliminating redundancies.
The implementation process begins this month, and the multi-phase project is expected to be complete by the end of 1999.
Henrique de Campos Meirelles, president and chief operating officer of $71.4 billion-asset BankBoston, said specific financial targets for the "redesign" had not yet been set, but it is part of a three-pronged strategy to boost overall performance.
The other two aspects of the strategy were the acquisition of investment bank Robertson Stephens & Co. from BankAmerica Corp., announced in May, and de novo expansions in Brazil and Argentina.
At the end of 1997, BankBoston told analysts it hoped to achieve 18% or greater return on equity and double-digit growth in earnings per share on a sustained basis by the end of 1998.
It registered a 20.05% ROE last year and boosted per-share income by 43%, but analysts said sustaining that will be difficult amid slower revenue growth and narrower interest margins.
"We estimated targets that were very aggressive," Mr. Meirelles said Tuesday during a telephone conference with reporters. "This is a very important package of strategic initiatives to achieve the kind of returns our shareholders are expecting."
Mr. Meirelles would not specify anticipated cost savings. "Today is not the day to bring up numbers," he said.
In addition to the branch network, BankBoston's reengineering efforts are focused on the investment products unit, small-business banking, private banking, marketing, operations, technology, cash management, and trade services.
Analysts said the program, like similar projects under way at Chase Manhattan Corp. and J.P. Morgan & Co., would take advantage of cost savings to invest in growth businesses.
The BankBoston project could result in a charge to earnings during the second half of the year, analysts said, although this was not seen as having a significant impact on the bottom line.
Analysts also said a greater focus on customer service would help BankBoston boost revenues in its slow-growing retail bank.
"Retention is the "hidden cost of the industry," said Sally Pope Davis, an analyst at Goldman Sachs & Co. "It's much cheaper to retain existing customers than to try and go out and get new ones."
In staying away from exact dollar numbers, Mr. Meirelles said the reengineering was focused on processes and was not intended to cut costs. It was driven by a string of acquisitions in recent years, changes in the industry at large, and the increasing use of new technologies to replace traditional retail bank services.
"We thought it was the right moment to step back and take a look at how we work," Mr. Meirelles said. "The idea was to rebuild an architecture that would enable us to be 100% customer-centric."
Analysts said BankBoston had little choice but to improve retail efficiencies, lest it fall prey to a takeover.
"They had to make some hard decisions now," said Michael Mayo, an analyst at Credit Suisse First Boston. "Retail is one area where they have less of a sustainable competitive advantage."
The first phase of the coming transformation will focus on branches and back-office support areas, the bank said. Eighty of the 114 jobs slated for elimination are in the telephone banking center, which is consolidating its night shift into one location from two.
Branches will be varied, some traditional, some fully electronic, some mainly selling investment products or small-business services. Some employees are to be retrained as sales associates.
Customers will also be steered toward electronic delivery channels for certain paper-intensive transactions now performed in branches.
A separate Internet banking group, led by executive vice president Lindsey Lawrence, has been established to "look at what the bank of the future is going to be and how we will be positioned to be one of the successful ones," Mr. Meirelles said.
No branches are scheduled to be closed as part of this project. BankBoston has closed 100 branches throughout New England since its 1996 acquisition of BayBanks Inc., eliminating 600 jobs.
Additional layoffs may result next year as the bank turns to the technology investments needed to support the new organization, BankBoston said.
But Mr. Meirelles said jobs would also be created during the project and most displaced employees would be retrained and offered new assignments.
