MINNEAPOLIS - Spurred by recent acquisitions and its parent's obsession with technological efficiency, the trust and investment unit of First Bank System Inc. has embarked on a cost-cutting plan.
The reengineering, which has been in the works since January, is aimed at adding about $20 million to the bottom line by 1997.
It will involve a blend of unspecified staffing cuts and technology improvements, with a goal of slashing First Trust's expenses by about 10% to 15%, according to John Murphy, the unit's chairman.
At the same time, First Trust has set its sights on aggressively increasing revenues by boosting assets under management to $50 billion by 1997, from $28.1 billion today.
"We think there is an opportunity to improve productivity by reducing expenses and adding revenue," Mr. Murphy said. "We haven't overhauled expenses in 20 years, and it's just good business practice."
In 1994, First Trust's net income was $37.7 million - or about 8% of First Bank System's total profit - on revenues of $205.9 million. Return on equity was a healthy 22.3%, while the efficiency ratio stood at 69.8%.
The cost-cutting effort, constructed with the help of Andersen Consulting, is focused on the unit's trust and asset-management divisions and does not involve First Bank System's relatively new retail brokerage business.
Mr. Murphy declined to predict how many of the unit's 2,000 system-wide employees might lose their jobs as a result of the changes.
One impetus for making the technological improvements now, Mr. Murphy said, was his unit's recent spate of acquisitions. Since mid-1992, First Trust has acquired domestic corporate trust businesses from J.P. Morgan, Bankers Trust Co. of California, and U.S. Bancorp.
Each of those trust units, along with trust departments of banks bought by First Bank System, used different software packages, making it tough to integrate them into First Trust's systems.
Mr. Murphy said First Trust's new systems will be engineered to accommodate future acquisitions more easily.
The unit's cost-cutting plan is the latest in a series of moves by First Bank System to improve efficiency. Since 1989, it has overhauled several areas, including corporate staffing, retail distribution, and mortgage operations, shaving annual expenses by an estimated $400 million.
First Trust also plans to increase assets under management by using tie- ins with First Banks to gain more business in areas such as 401(k)s, pensions, and managing finances for "high-end" affluent customers.
Among the unit's best-known performers is its proprietary family of 24 mutual funds, the First American Investment Funds, with assets of $5.7 billion.
Those mutual funds, along with bonds, equities, and annuities, are sold by 166 retail brokerage employees stationed in First Bank branches.
By using software that interfaces with other First Bank System units, First Trust also hopes to more easily snare business from First Bank's banking customers.
To that end, First Trust has been working with First Bank System's business technology group to ensure that all new technology interfaces with existing systems within the parent company.
Already in progress is a conversion of all bondholder record keeping to new Corporate Universe software manufactured by Integrated Software Solutions Inc. of Malvern, Pa.
"We want to hook into the massive investment that First Bank System has already made in technology," Mr. Murphy said.
Mr. Engen is a freelance writer based in Minneapolis.