Layoffs Top List of Worries

For bank chief executives, one of the hottest issues of 1990 was staff reductions, and that is not likely to change this year or next.

Four out of five chief executive officers responding to the American Banker/Heidrick & Struggles survey said they tried to improve efficiency last year by reducing the number of employees. As for this year, 73% say they anticipate continued layoffs.

Most cite industry consolidation as the cause, which may well strike fear in their hearts of bank employees everywhere: bank executives, consultants, and stock analysts all predict continued consolidation throughout the 1990s.

About 12% of the bankers surveyed supported their call for consolidation by citing the cost efficiencies to be gained.

"I think banks are in an excellent position right now to take advantage of the industry softening to gain more efficiency by making do with less employees," said Mr. Monogenis. "It will help them get their costs under control. If I were a stock analyst on Wall Street, I would be elated at the answer to that question."

Fortunately for bank employees, the layoffs are not expected to be drastic in most cases. Forty-five percent of the CEOs surveyed anticipate reductions of only 1% to 4% of their work force, 27% reported 5% employee reductions for 1991, 20% will lay off 6% to 10%, and 8% of the respondents will have to layoff more than 10%.

When asked to identify other major issues bank leaders will have to face in the 1990s, many survey respondents named the three Cs: consolidation, competition, and capital.

No big surprises here, said Emanuel N. Monogenis, who heads the New York-based financial institutions arm of Heidrick & Struggles Inc. "These responses are right on target," he said. "Competition has negatively affected banks, and that's what's driving the concern about capital and consolidation."

But these CEOs don't seem to be as concerned about rival banks as they are about nonbank competitors, such as General Electric and American Express. All of the CEOs agreed that non-bank financial services companies will continue to pose a competitive threat to traditional banks. They agreed that loans, home mortgages, and credit cards can never again be the exclusive preserve of banks.

"Now bankers are realizing that they have to redefine their products and services and, at the same time, restructure their own organizations," said Mr. Monogenis.

And that is the driving force behind consolidation. "Consolidation brings two groups of customers together. It brings two sets of employee experts together and two sets of technological systems together. It matches good resources and forfeits bad resources. It reduces costs," said Mr. Monogenis.

At the same time bankers are working on improving the bottom line by cutting back on unnecessary expenses, they will also be searching for a much-needed capital infusion.

"Capital is important because the old phrase in banking is |Cash is king,'" said Mr. Monogenis. "Right now banks don't have money. Even the nation's largest bank, Citicorp, is trying to sell off certain of its businesses to raise capital. But if a bank wanted to go out and buy another bank, right now it couldn't."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.