Huntington Bancshares' announcement this week of 1,000 layoffs was a case of no longer being able to postpone the inevitable, said chairman and chief executive officer Frank Wobst.
In an interview Thursday, Mr. Wobst said the $27 billion-asset company had been hoping since last year, when it merged six banks under one charter, that it could reduce its high employee count at reasonable cost through attrition.
"Why didn't we charge off last year?" Mr. Wobst asked rhetorically. "That's a good question. We thought we could do it gradually without affecting earnings."
On Wednesday the Columbus, Ohio-based holding company said it was ready to let 1,000 people go in order to lower its efficiency ratio and improve returns.
Huntington was also coping with a staff increase that resulted from the 1997 acquisition of First Michigan Bank Corp., Holland, and this year's purchase of 60 branches from Barnett Banks Inc. in Florida.
"We had been thinking about this for the past several months when it became apparent we needed to tighten the belt," Mr. Wobst said.
The 1,000 layoffs equal 10% of the work force. Huntington plans to close 34 branches and sell five others.
Mr. Wobst said he expects the moves to boost return on equity to 18% from 16.43% and lower the efficiency ratio, a key measure of overhead, to below 50% from the current 56.46%.
He also said he hopes the layoffs and branch closures would add $125 million to income by the end of 1999.
The company plans to take a $90 million charge against this year's fourth-quarter earnings to cover the restructuring.
More than 80% of the jobs to be eliminated are in back-office operations; the rest are in branches to be shuttered or sold. Mr. Wobst said 250 employees have already been let go.
"This is not an across-the-board curtailing of employment, but rather very pointed," he said.
He denied that the action was intended to dress Huntington up for a sale, as has been persistently speculated. Mr. Wobst said if Huntington were truly interested in finding a buyer, it would let the acquiring company do the firing. The goal is to boost Huntington's share price, he added.
Without the cutbacks "we would become a mediocre or less-than-average performer," he said. "When you become weak, you lose the confidence of the marketplace."
"It's a recognition that they have to improve on the revenue and expense dynamics," said analyst Joseph Duwan of Keefe, Bruyette & Woods Inc. "I applaud them on the action."
