Bank One Corp. said Monday that over the next two years it expects its biggest earnings gains to come from credit cards, consumer finance, and investment management.
In a Monday filing with the Securities and Exchange Commission, the $262 billion-asset bank also said it was on track to cut expenses related to its deal last year to buy First Chicago NBD Corp. The company said it would cut up to 4,700 jobs, or 5% of the combined work force.
A spokesman said about half of those jobs had already been cut and the remaining positions would be gone by midyear 2000.
"Many of the positions have already been eliminated due to outsourcing, consolidation, and reorganization," the spokesman said.
Bank One, which took a $984 million merger-related charge in the fourth quarter, said it would take another $526 million in charges this year.
Joseph Duwan of Keefe, Bruyette & Woods Inc. said the job reductions seemed in line with expectations, though Bank One had given little guidance in this area. Many of the job positions eliminated were operational, Mr. Duwan said. The credit card and commercial banking businesses seemed to have taken the biggest cutbacks, he added.
The filing provided the company's first official figures related to job cuts. Chief executive officer John B. McCoy has only said that Bank One would have a net gain in jobs within three years, bringing the total employment to more than 100,000. The combined companies had 94,000 employees.
Michael Mayo, an analyst with Credit Suisse First Boston, said he would have liked to see more details on the job reductions.
"It's more vague than it could be," he said. However, he acknowledged "it's a balancing act. On one hand you don't want to disrupt business. On the other hand, you want to give information to investors."
In the filing, Bank One also broke out financial information for its five lines of business-commercial banking, credit cards, retail banking, consumer finance, and investment management.
The company said near-term growth in its retail business is expected to come largely from last year's purchase of First Chicago.
Meanwhile, Bank One's credit card operation had a return on equity of 20%. The company claimed that ROE would have reached 30% if not for conservative capital levels. Bank One holds 9% of its managed assets as capital.
Credit cards, which earned $1.2 billion last year, should continue to grow by 20% over the next two years, the company said, and investment management, which earned $250 million last year, should grow by more than 25%.
Investment management income contributes to both commercial and retail banking and includes insurance, mutual funds, annuities, and corporate and personal trust.
Investment management had a return on equity of 35%, making it the highest-earning but smallest in revenues of Bank One's businesses.
Consumer finance, which contributed about $300 million to last year's earnings, should grow by as much 20% over the next two years, the company said.
Credit cards had the best ratio of operating expenses to revenue-36%. However, Bank One officials have said it costs a lot to make money in the credit card business. The company spent $2.85 million for its credit card business last year. Analysts said a large portion of that went to marketing.
Commercial banking was the largest earnings contributor last year, and its return on equity of 20% pleasantly surprised some analysts. Mr. Duwan said the company had indicated that merger integration in the commercial banking area has been ahead of plan.
Retail and commercial banking, however, were the most inefficient businesses. Retail banking had an efficiency ratio of 78%, and commercial banking had an efficiency ratio of 56%. Most banks of Bank One's size like to have efficiency ratios in the 50% range.
By breaking its businesses out by categories, Bank One hopes investors will recognize some of its more profitable operations. Bank One's stock closed Tuesday at$55.4375, up 3 cents.
