SAN FRANCISCO -- First Interstate Bancorp unveiled a series of measures on Tuesday which would eliminate more than one out of 10 jobs companywide, improving efficiency and making the Los Angeles-based bank company one of the industry's top performers.
If successful, the plan will help First Interstate produce a sustained return on equity between 18% and 20%, the company said.
In a conference call with reporters, chairman and chief executive Edward M. Carson said the latest actions continue a process of evolution, begun in 1990, that was designed to change the nation's 14th-largest banking company from an amalgamation of separate banks into a fully integrated organization.
First Interstate has combined retail operations in 13 Western states into four regional divisions. Following the enactment of legislation allowing interstate branching, "we will bring those four regions together and truly be a banking company," Mr. Carson said.
Company officials said that while a variety of back-office operations are being combined, the four regions would remain separate for marketing purposes.
An unstated purpose of the pro-. gram is to give First Interstate the option of remaining independent, analysts said. However, Mr. Carson denied that the plan is intended to "fend off" unwanted suitors.
Last March, First Interstate outlined a strategic plan it said would trim its ratio of expenses to revenues - which exceeded 65% last year - to 58% or less by 1995. That announcement came shortly after reports surfaced that California rival Wells Fargo & Co. had offered a $90-per-share buyout.
The program described on Tuesday provides details on how First Interstate plans to cut costs and centralize operations, saving $167 million annually by cut-backs in jobs, facilities and other expenses. With revenue projected to grow at a relatively slow 5% to 6% rate through 1996, not counting acquisitions, analysts noted that expense cuts are necessary to achieve superior returns.
"The best companies grow earnings per share at a 10% or better rate," noted Francis X. Suozzo of S.G. Warburg & Co. "If First Interstate did nothing, the best they could do would be 5%."
Through a combination of early retirement and layoffs, the bank is eliminating 3,053 of its roughly 28,000 full-time-equivalent jobs by the end of 1995. First Interstate is already down from its peak of 36,000 full-time employees four years ago. More than 1,600 of the latest round of cutbacks will come from back-room processing and administration functions. Some 1,127jobs will be eliminated from the retail banking network.
The company will take a $139 million restructuring charge in the third quarter plus $26 million in additional charges through. 1995.
Key to First Interstate's program is centralization of administrative and service functions. All finance operations throughout the system will be run from one office in Phoenix, for example.
Mr. Carson also said the company has bought back some five million shares of stock, more than halfway to the eight million -- nearly 10% of outstanding common stock - it announced in March as its repurchase target.