Acquisition activity is not causing the decline in career banking jobs that many of the industry's rank and file may be fearing, according to research by the Federal Reserve Bank of Cleveland.
The study of bank labor trends from 1984 to 1996 showed that full-time employment actually was increasing among consolidating institutions in recent years.
Jobs declined significantly at the average large bank over the 12 years covered in the survey. But in the second half of that period, employment rose-as did the number of banks with assets exceeding $5 billion.
This conclusion could be heartening to employees of companies like NationsBank Corp. and First Union Corp. These workers have come to anticipate that thousands of jobs will be cut after major acquisitions, and they get distracted wondering where the ax will fall.
The Cleveland Fed study lends support to statements like one recently from First Union chairman Edward E. Crutchfield to reassure employees of an acquisition target, CoreStates Financial Corp. He said that after First Union's merger in 1995 with First Fidelity Bancorp. of New Jersey, it retained 11,000 of the acquiree's 12,000 employees.
The Fed researchers sampled 200 banks involved in acquisitions from 1984 to 1994. They found that, within four years of a deal's closing, the acquiring and target banks had expanded their payrolls by 7% and 5%, respectively.
"The evidence does refute the commonly held idea that acquisitions are usually accompanied by large employment cuts," economist Ben Craig wrote in the third-quarter 1997 issue of the Federal Reserve Bank of Cleveland's Economic Review.
The results for consolidating banks contrast with a broader downsizing trend in the industry.
Mr. Craig's article said the average bank with at least $5 billion of assets had 10,308 full-time-equivalent employees in 1984. By 1996, the average had fallen by 22%, to 8,023, though that was a rebound from 7,686 in 1990.
Smaller banks' labor demand also declined but steadily and gradually. In 1984, banks with $100 million to $500 million of assets had an average of 151 employees. By 1996, the average had fallen 13%, to 132.
"Decline in banking employment over the last 10 years has been a large- bank phenomenon," Mr. Craig said. This "phenomenon" included the shift away from human labor to automated services and contracting more work to outside service providers.
Mr. Craig attributed the swelling of payrolls at consolidating banks to growth in their markets.
"Banks in growing markets tend to get bigger-in part by acquiring other banks, which can then participate in the expanding market," he said in the report.
The Cleveland Fed's findings are borne out in data compiled by the Federal Deposit Insurance Corp.
From December 1991 to June 1997, the total number of full-time- equivalent employees at insured commercial banks grew 2%, to 1.5 million.
Job rolls expanded even as the number of commercial banks shrank by 20% during those five and a half years, to 9,308 from 11,685.
Bank workers had a greater chance of finding openings at acquiring institutions, according to the Cleveland Fed. Within three months of making its purchase, the average acquiring bank's payroll had grown 2.3%. Within four years it was up 6.9%.
Meanwhile, the average target bank's full-time payroll grew more slowly- rising 1.5% within three months of being acquired and 4.8% within four years.
