CoreStates to Chop 19% of Work Force

CoreStates Financial Corp. said Wednesday it will slash 2,800 jobs, or 19% of its work force.

The planned cuts, far more extensive than analysts had expected, place the Philadelphia-based CoreStates at the forefront of an industrywide drive to reduce costs.

CoreStates, which has assets of $27.4 billion, said the cuts are part of a broad restructuring aimed at saving $180 million by the fourth quarter of 1996. The company will take a $110 million charge in this quarter to cover costs of the plan.

"It is sad to say goodbye to so many colleagues and friends," said Terrence Larsen, CoreStates' chairman and chief executive. "But it's a reflection on the tough realities of being in the banking business in the 1990s."

The job reductions will come from a combination of layoffs, attrition, volunteer severance, and a hiring freeze, CoreStates said.

Though many banking companies have announced staff reductions in recent months, few of the cutbacks have been as large as CoreStates' in percentage terms. Many of the reductions have been closer to 10%.

The 19% planned by CoreStates is "more than anybody expected, given the kind of emphasis that CoreStates has placed on employee morale in the past," said Nancy Bush, an analyst at Brown Brothers Harriman. Management obviously "felt that drastic steps were called for," she said.

Analysts had expected CoreStates to unveil a plan that would save no more than $120 million.

Banks have been seeking to become more efficient to offset increased competition and the effects of rising interest rates.

For CoreStates, the pressure to cut costs has been intensified by analysts' concerns that recent acquisitions will hurt earnings.

CoreStates' stock price rose $1.125 a share on Wednesday, to close at $32.38

The cuts are expected to extend throughout the company, even reaching top executives. Among the departing: three members of the office of the chairman, including chief financial officer David Carney.

Mark Stalnecker, chief trust and investment services officer, and Leslie Butler, chief human resources officer, also got pink slips.

Senior management has been tight-lipped about the reorganization since September, when CoreStates announced it had hired Aston Limited Partners, a New York-based consulting firm to advise on the restructuring.

The final plan excises some layers of management, makes some senior managers more accountable for specific operations, and pushes authority down the ranks, said Lehman Brothers analyst Michael Mayo.

The bank said it is dividing its market into four regions. Each region will be responsible for marketing and developing products on its own.

In the process the bank is closing 37 of its 371 domestic offices. CoreStates said it plans to "reconfigure" branches with large full-service offices surrounded by more narrowly focused "satellite" offices.

"The resources needed for decision-making in a local marketplace will be available there," said Rosemarie Greco, president and chief executive of the bank's lead subsidiary. "This will enhance the local autonomy that has served us well in our markets. There should be no need to go to Philadelphia for decisions on customer needs in Harrisburg," she said.

Another part of the redesign is a consolidation of the third-party processing businesses, which will be combined under a single management led by Robert Gilmore, chief technology and processing services officer.

All of the major risk management functions are being grouped together under Charles P. Connolly Jr., senior executive vice president.

The large expense reductions clearly signal the bank's intentions to remain independent. CoreStates' stock price has been sluggish, analysts said, and this move should jump-start it.

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