Magna Group Inc. of St. Louis is about to complete an unusually rapid, six-month consolidation of eight subsidiaries.
The feat is expected to contribute significant cost savings to a banking company that has recently doubled in size, to $4 billion in assets, through acquisitions.
Magna is on target to be saving $16 million a year by the end of 1994, and will probably save $18 million, according to A.G. Edwards & Sons Inc., St. Louis.
About two-thirds of the savings will come from systems consolidations, said Anthony Polini, an analyst at the regional securities firm.
The management and systems strategy that Magna is pursuing is similar to the one successfully used by Banc One Corp.: allowing affiliate banks to make independent product and pricing decisions while their performance is monitored and measured on central computer systems.
Magna expects to complete the systems consolidation next week with the conversion of its bank in St. Charles, Mo., to Magna's in-house systems.
And the holding company is in the first phase of developing an executive information system to give subsidiaries' presidents a snapshot, in graphic form, of their bank's performance against company benchmarks.
In the first phase, monthly data about loan quality are provided. Future versions of the system will give managers daily reports on loan status and on profitability data according to product and by individual customer, Magna said.
Helpful to Bank's Board
"I'm using the reports to make presentations to my board," said Kent McNeil, president of Magna Bank St. Charles, which has $220 million in assets. "They help the board look at trends in loan quality."
Some Wall Street analysts are beginning to take a second look at Magna Group, which grew to its current size with the acquisition last December of Landmark Bancshares Inc.
Magna ranks third in assets in the St. Louis metropolitan area, behind Boatmen's Bancshares Inc. and Mercantile Bancorp. Magna has 92 branches in some of the fastest-growing St. Louis suburbs. Before December, Magna, which had been built in 39 acquisitions during the preceding decade, had $1.9 billion in assets and was based in Belleville, Ill.
"Magna has been very much undervalued by Wall Street," said Mr. Polini of A.G. Edwards. "They're not as respected as they should be."
About half of Magna's eight banks had been using in-house systems, run by subsidiary Magna Data Systems, and half were outsourced to Systematics Inc. of Little Rock, Ark.
The bank considered outsourcing the consolidation project, hiring Ernst & Young to evaluate potential cost savings. In March 1991, the resulting study said the company could save at least 18% more money over seven years by keeping operations in-house.
Last October, Magna hired Linda Fabel, a 23-year veteran of International Business Machines Corp., to head technology and lead the consolidation.
Since then, Ms. Fabel has reduced staff by 15% in operations and 10% in data processing, to 240 employees for the two areas. Productivity has gained 25% from combining operations, she said.
Saving More than Expected
Thus far, the company has exceeded projected data processing savings of $2.7 million a year. It has saved $3.2 million and reduced the projected budget for 1993 to $6.2 million. Most of the savings come from combining operations in check processing, proofing, teller balancing, and reconciliations.
By automating functions and moving to relational data bases and optical storage technology, the company plans to reduce data processing and operations staff another 4% to 5%, through attrition, Ms. Fabel said.