Society Takes Aim at Incompatibility
Preparing for acquisitions, Cleveland-based Society Corp. plans a transformation of its computer systems to eliminate incompatibility among back offices.
The first step, new branch software for tellers would form the backbone of a proposed sales and marketing system.
The teller software is designed to be flexible enough to run the branch hardware of any acquired bank. Testing is scheduled to begin this week, and Society's tellers are to begin using the system full time in mid-September.
The bank expects the teller software to cut millions of dollars a year from operating costs by eliminating redundant systems at acquired banks.
PCs for Lenders
Society also has other technology projects in the works. Most notably, it plans to give corporate lenders personal computers through which they can use a variety of analytical software, improving their productivity.
Only a handful of other banks are taking this approach to improve their lending function.
As a regional bank in a competitive Midwest market, $15 billion-asset Society has been acquiring local rivals. Two years ago, for example, it acquired Trust Corp. in Toledo.
Society is expected to bid for Ameritrust Corp., another Cleveland-based bank which, like Society, has operations in Indiana.
Positioning for Survival
"It's clear the industry is consolidating," said Kenneth Puglisi, an analyst at Keefe, Bruyette, & Woods in New York. "Society sees itself as one of the survivors."
Mr. Puglisi said Society's management is talented, young, and capable of running a bigger bank.
"You don't want to turn down an opportunity because of what may be required in the back office," he said.
One of Society's teller systems dates from the late 1960s. Two years ago, when the bank acquired Trust Corp., the old system was already running at capacity and unable to handle the new branches.
Millions in Savings Foreseen
Society now runs three teller systems with millions of dollars in redundant hardware.
The new software, developed in-house, can run on a variety of computers, so Society can keep using the hardware of any branches it might acquire.
"We will save millions of dollars when we make an acquisition by not buying new hardware," said Allen Gula Jr., executive vice president of the banking company.
Costs of operating a newly acquired bank could be reduced by 50% of more with the new teller system, Mr. Gula said.
He expects the system to be in 210 of Society's 315 branches by November and in the rest next year.
Society, which has been hampered by unexpected costs of acquisitions, has been reducing its overhead.
The acquisition of Trust Corp. drew criticism from the banking industry as the poor quality of the loan portfolio came to light.
But analysts said Society has worked through the problems. Its performance has improved in the past year, with return on assets rising to 1.16% in the second quarter from 1.06% a year earlier.
The bank has also been successful at trimming operating costs.
Its efficiency ratio in the second quarter of 1991 - the percentage of net revenues eaten up by expenses - has come down to 62.2%, slightly less than the industry average. In the second quarter of 1990 it was 68.6%.
Society said the new teller system will save operating costs whether or not the bank makes additional acquisitions. For example, the bank said, the 20 steps tellers now take to cash a check will be reduced to three.
15% Fewer Tellers
In anticipation of such efficiencies, the holding company's Society National Bank has already reduced its teller staff about 15%, said Henry L. Meyers III, president of bank.
Mr. Meyers said the teller system will also enable tellers to answer customer questions concerning their accounts more easily.
That customer information, collected in a sophisticated data base, will form the basis for a large-scale customer information system containing data on all a customer's accounts with the bank.
That information, in turn, is to form the basis for a planned sales and marketing system for branches, Mr. Gula said that system will go into development early next year.