First Chicago Consolidating Systems
As part of its effort to cut costs in its wholesale operations, First Chicago Corp. is folding the back office of a subsidiary into its main data processing site, according to sources at the bank.
Systems at First Chicago's American National Corp., a corporate bank, will be transferred to the parent company's Chicago data center. American National has about 70 operations employees and a data processing budget of $14 million a year.
The move is scheduled to take place in early September.
1,000 Layoffs Companywide
The consolidation may be a small step in helping First Chicago achieve its goal of cutting $100 million in operating costs over the next year. Last week, officials of the $48 billion-asset bank holding company said the bank would lay off 1,000 employees, or 6% of its work force.
First Chicago officials said last week that the bulk of the cost savings would come from the global bank, which has 7,200 employees and serves large corporate customers.
American National constitutes only a small piece of its parent company's wholesale business; the vast majority of the global business is done by First National Bank of Chicago. American National serves middle-market corporate customers located in the Midwest, particularly in Chicago.
Cost Cutting a Priority
"American National has stumbled with respect to weaker credits in the middle market, and weak commercial real estate," said John Snow, banking analyst with Chicago Corp. Consolidation reflects "the fact that First Chicago is anxious to improve the bottom line and earnings capability any way it can."
First Chicago declined to comment on the consolidation of American National's operations. A spokeswoman said that the project was not far enough along for officials to discuss it.
"First Chicago is positioning itself very appropriately," said one source close to the project. Its executives "want to determine what their costs are."
No layoffs in American National's operations have been announced, a source said.
Robert J. Buskas, executive vice president and head of American National's operations, took early retirement two weeks ago. Mr. Buskas, who also headed the American Bankers Association's automation and operations committee, will continue to work for First Chicago on a consulting basis.
Consolidations on Rise
"Every bank is looking to reduce the number of different systems they have, and to consolidate and centralize the paper process," said William Storts, head of Andersen Consulting Co.'s banking practice.
"Consolidation [generally] is a purely economic deal. Banks are trying to cut the fixed costs of running data centers."
American National and First Chicago run similar International Business Machines Corp. computers and software. American National will maintain a handful of staff members and some equipment, including printers and network equipment at the American National data center. All systems and applications will be shifted to First Chicago's site.
It is unclear whether First Chicago plans further back office consolidations. The holding company's data center in New York processes trust and custody transactions and costs about $10 million to $15 million a year, people close to the bank said. Sources also said they believe that a $20 million credit card operation in Elgin, Ill., will not be consolidated.