This isn't the first time that Roger L. Fitzsimonds has had to pull his company out of a bad situation.
In the early 1970s, when he was a senior vice president at Firstar Corp.'s predecessor company, First Wisconsin Corp., he had to clean up a commercial loan portfolio that was awash in sour real estate credits.
In the mid-1980s, he helped the bank survive the Third World debt crisis.
But Firstar's chairman and chief executive officer now faces a rapidly consolidating banking industry. And he is trying to keep his company from becoming just another footnote in banking history, one more prey gobbled up by banking's predators.
"We have consistently said we have to earn the right to be an independent company," he said in a recent interview. "What we were two years ago, what we are today, and what we'll be a year from now-clearly there will be substantial differences."
The $19.5 billion-asset Firstar has fallen behind the profitability levels of its competitors. Early last year, Mr. Fitzsimonds responded by ordering massive job cuts: 2,500 posts, or 26% of the work force. The goal was to increase pretax earnings by $140 million this year.
That done, Firstar must sustain revenue growth.
Most observers are skeptical. But Mr. Fitzsimonds, a former Army captain, is not one to give up easily. His bank will complete its restructuring at the end of June. In July it will give an assessment to analysts, he said.
"We've worked very hard from the top to the bottom of the company," he added, "and clearly we're on the down side of the mountain."
The gut-wrenching restructuring hardened opinions in the industry that Milwaukee-based Firstar couldn't survive independently. The layoffs also tarnished the company's image in its hometown, where bank employees had thought they were safe from the downsizing occurring at other businesses.
Though Firstar may become more profitable in the short run, long-term success may be harder to achieve. Companies like Minneapolis-based First Bank System Inc., which competes with Firstar in Milwaukee, Chicago, and Minneapolis-St. Paul, have the capital and management depth to keep raising industry standards.
"You get rid of 2,500 people," said Lewis Mandell, dean of the college of business administration at Marquette University in Milwaukee, "and you realize you're just where your competition was when you started."
Mr. Mandell, who is a former banking consultant, said he believes Firstar has gotten through the hardest part of its restructuring. The layoffs stimulated negative news coverage, he said, but no worse than in any other downsizing. "Firstar really needed strategically to make an announcement to Wall Street, even though it took heat locally."
In his office, a pensive Mr. Fitzsimonds said of the task at hand: "There are two givens and a challenge." The givens are the need to keep a clean loan portfolio and to remain efficient. The challenge is to increase revenue.
To grow in an environment where lending is extremely competitive, Firstar must go up against large and formidable rivals. Commercial loans have been tough to book-a decline in this area caused Firstar to miss analysts' fourth-quarter earnings projections by five cents-but they still make up 55% of total loans.
As a result, Firstar has shifted its focus to businesses that earn fees, including trust, investments, and credit cards. Company officials said they also hope to make up for slow loan growth by milking relationships with 1,500 correspondent banks. Through them, Firstar generates revenue from loan participations, credit cards, and data and check processing.
The fastest-growing business, however, is trust and investments, whose revenue growth is projected at 10% to 15% a year. With $146 million of revenue last year, trust and investments was among the lines of business the company labeled crucial during the reorganization.
Consolidating all trust, asset management, and brokerage businesses under one umbrella gave the bank a much clearer focus, company officials said.
"We think today and a year from now we'll be able to make much faster decisions, have much more consistent decision-making, by lines of business," Mr. Fitzsimonds said.
But competition will remain stiff, especially in Milwaukee. In addition to its smokestack industries, breweries, and bowling alleys, the city is home to numerous asset management companies.
Last year, Firstar made a $20 million investment in technology. A more profitable consumer business resulted, highly reliant on data bases and information-just as at some of its toughest competitors. The bank now offers fewer checking account products, and each one is priced according to how much the customer uses the bank. One account includes a $5 teller fee.
For all of Mr. Fitzsimonds' efforts, the restructuring has not gone easily. Just three months after Firstar announced it was moving to a line- of-business structure, Michael J. Bills, senior executive vice president in charge of trust and investments, quit to start his own consultancy.
The reorganization has made Firstar vulnerable, said Charles Wendel, a New York-based consultant and critic of bank downsizing programs. "Employees, who should be focused on customers, are focused on their own fates."
Mr. Wendel, whose company, Financial Institutions Consulting, has studied the restructuring trend in banking for the past few years, has been particularly critical of Tandon Capital Associates, the cost-cutting firm that advised Firstar. Tandon does little more than prepare banks for sale, he said.
In Milwaukee, the white, 40-story Firstar Center is a skyline landmark, yet the company has had to sit idly by while competitors expanded. In-town rival Marshall & Ilsley Corp. announced a deal in March to buy $3.7 billion-asset Security Capital Corp. The transaction would let Marshall & Ilsley surpass Firstar as the biggest bank in Milwaukee.
But Firstar is not yet in a position to do deals of its own. With first- quarter net income of $72 million, or 49 cents a share, the company missed analysts' consensus estimates by a penny.
Mr. Fitzsimonds insisted his company is on track to become more profitable. If it's not, analysts said, Firstar will surely be taken over.
Analyst Michael Plodwick of Salomon Brothers Inc. recently named Firstar as among the banking companies most likely to be acquired. Dain Bosworth Inc. analyst Ben Crabtree predicted Firstar would be in play if it doesn't have a strong second half.
Mr. Fitzsimonds, however, said he likes to think that he'll be an acquirer come June 30.
"Acquisitions are an important part of our business," he said. "We are intently looking at acquisitions. You'll hear from us again in this area."
Whatever happens, Mr. Fitzsimonds said, he will never forget the lessons learned in the 1970s and '80s. They left him with the corporate mantra he still repeats: "Soundness, profitability, and growth-in that order."