Fleet Financial GROUP said Wednesday that it is embarking on a seven-month, comprehensive review of costs throughout its banking operations in the Northeast.
The program, dubbed Fleet Focus 1994, will ultimately result in staff reductions and other cost-cutting measures, said the Providence, R.I.-based banking company.
The "reengineering" is designed to meet chairman Terrence L. Murray's goal of reducing Fleet's efficiency ratio from 67% -- that is, 67 cents of expenses for each $1 of revenue -- to under 60% within two years.
Kudos from Wall Street
Analysts applauded Fleet's decision to go public with its plan.
"They have really put their feet to the fire," said Michael Mayo, an analyst at UBS Securities. New York. "The entire investment community will be watching them, and that's good."
Eugene M. McQuade, Fleet's chief financial officer, said in an interview that Fleet hopes to add $125 million to $150 million of annual profits as a result of the program.
Fleet is also sending a clear, though risky, message to its employees in unveiling the plan. Officials said they have not established a workforce reduction goal but know that the program could create low morale and fear.
Finessing the Work Force
But management said it hopes to persuade employees that the future lies in their own hands. Fleet is asking all employees to work toward the goal of improving their units' profitability by 50%, Mr. McQuade said.
"We are asking them not just to fine-tune their jobs but to redefine them," he said.
Fleet, the nation's 14th-largest banking company, has long been plagued by high costs. The New England-based company, which has $48 billion of assets, operates seven banks in six northeastern states and several finance units and fee-producing subsidiaries.
In March, Fleet took Steps to centralize an unwieldy organizational structure that had been blamed for problems in some of its units.
The bank reduced many management responsibilities of its seven bank presidents, centralizing power in the hands of three new vice chairmen in Providence.
The company said Fleet Focus is an outgrowth of that reorganization.
The program, designed in consultation with Tandon Capital Associates, a New York-based bank advisory firm, will be administered by 50 employees companywide.
Fleet said they were chosen from 250 of the bank's "top performers."
The group will meet over the next few months with 150 business units to discern ways to trim expenses.
Aiming for March
After a seven-month review period, the group will make its recommendations to Mr. Murray, Mr. McQuade, and the vice chairmen -- Robert Higgins, H. Jay Sarles, and Michael Zucchini.
Fleet hopes to put the recommendations into effect by March.
Some analysts praised Fleet's measured approach to layoffs as more effective than a massive slash-and-burn technique.
"Other banks have run into problems in the past when they have cut costs too hastily," said Gerard Cassidy, an analyst with Hancock Institutional Equity Services. "Those banks run the risk of adversely impacting their customer base."