Zions Bancorp. in Salt Lake City will close almost two dozen branches and lay off up to 7% of its employees as it works to cut costs.
The moves are part of an effort by the $57.1 billion-asset company to get its efficiency ratio below 65% by 2017 and hold noninterest expenses steady at $1.6 billion for this year and 2016. Overall, Zions said it wants to achieve annual gross pretax cost savings of $120 million by 2017.
"Our goals in doing this are, first, to create the best possible customer experience, to be fast to market, to be quick, to be able to get deals done in a quality way, and to do it with an improved cost structure," Harris Simmons, Zions' chairman and chief executive, said during a conference call Monday to discuss the planned changes.
Simmons said during the call that Zions would close 23 branches and reduce its headcount by 6% to 7%, with cuts split evenly between the branch closures and reductions elsewhere. Based on Zions' March 31 employment totals, the company could cut up to 725 jobs.
Zions will also consolidate its seven charters into a single bank. The company started growing outside of Utah in 1985 when interstate banking began to take hold, deciding at the time to keep local management and individual charters to help with client retention.
"The financial crisis has, fundamentally, had us rethink some of the ways we do business, the composition of our portfolio, the risk management that we have in place," Simmons said.
Zions will still maintain its separate bank brands and retain local chief executives with local credit authority. The charter consolidation requires regulatory approval; Zions did not provide a timetable for completing the consolidation.
As part of the restructuring, Zions promoted Keith Maio, chief executive of National Bank of Arizona, to corporate chief banking officer. In the newly created post, Maio will be responsible for retail banking, wealth management and residential mortgage lending. Maio will remain National Bank of Arizona's chairman, and Mark Young, the bank's executive director of real estate, was named the bank's CEO.
Additionally, Scott McLean, Zions' president, was given the added title of chief operating officer. Zions also promoted LeeAnne Linderman, formerly executive director of retail and omni-channel banking at Zions Bank, to executive vice president of retail banking at the parent company.
Zions also said Monday that it has sold $81 million of amortized-cost collateralized debt obligations during the second quarter, realizing a pretax loss of $25 million.
To improve revenue, Zions widely considered to have one of the more asset-sensitive balance sheets among regional banks will strengthen its net interest margin by using cash to buy short-term mortgage-backed securities. Management still intends to maintain a "fair amount of upside of our asset sensitivity, but not as much as we've had," Simmons said.
Zions has been selling its collateralized debt obligations as a way to improve capital ratios. The Federal Reserve Board in 2014 rejected Zions' capital plan as part of the Comprehensive Capital Analysis Review. This year, Zions passed, though its 5.1% Tier 1 common capital ratio was just above the required 5% minimum.
The market and analysts responded well to Zions' news. Its stock price rose more than 6% Tuesday morning in heavy trading.
Marty Mosby, an analyst at Vining Sparks, wrote in a research note to clients that the changes addressed Zions' high cost structure, management's unwillingness to invest in mortgage-backed securities and the company's asset sensitive balance sheet, which has led to margin compression.
These initiatives "are the right steps to address the pressures that have hung over [Zions] since the onset of the financial crisis," Mosby added.