Banks' year-2000 costs keep rising as the millennium nears and efforts are stepped up to adapt computer systems to meet the challenge, but Wall Street analysts seem unfazed.

Chase Manhattan Corp. said last week it is raising its three-year millennial changeover budget to $300 million, from $250 million. The New York-based bank needs more funds to test computer systems, said senior vice president Steven L. Sheinheit.

The millennial problem stems from two-digit data fields common in many older computer programs. These systems may treat 2000 as 1900, distorting many calculations. Economic effects could be widespread (see related story on page 29.)

BankBoston Corp., among the first banks to release a year-2000 budget, said recently it now expects to spend $75 million, up from $50 million.

But analysts do not think the higher projected spending will hurt most banks' bottom lines.

"We don't see any reason to change expectations for long-term growth rates due to the year-2000 problem," said Michael L. Mayo, industry analyst at Credit Suisse First Boston.

Nor are most analysts surprised by the shifting figures for millennial updating of information technology.

"Determining the amount of repair and remediation to be done and the associated costs is an ongoing process," said Kevin Timmons, senior bank analyst at First Albany Corp.

"Well let's put it this way, the costs are not going down," said Anthony R. Davis of SBC Warburg Dillon Read & Co. But he said investors should not be worried.

"It's not as if there will be an astronomical leap in this spending," he said. Among banks he follows, year-2000 expenses "are just 1% of 1997 operating expenses over a three-year period, which is really not a lot."

Chase said it spent $70 million last year and expects to spend $150 million this year on the millennium hurdle. The rest will be spent in 1999, when the bulk of the testing will take place.

The $366 billion-asset institution will create more "time machines" to simulate the millennium change. This equipment will aid the bank in testing multiple systems simultaneously.

Besides testing, equipment upgrades and contingency planning costs contributed to Chase's increased spending, Mr. Sheinheit said.

Chase has assessed 98% of its systems, including 2,700 applications and 3,000 external interfaces, Mr. Sheinheit said last week at the Bank and Financial Analysts Association spring symposium. More than 1,000 people are working on the project.

The investment community is getting a closer look at banks' year-2000 costs because regulators are requiring greater disclosure.

Last month Citicorp revealed that its year-2000 remediation will cost $600 million over three years. Fleet Financial Group Inc. does not expect to spend more than $150 million to fix its systems.

NationsBank Corp. will allocate $120 million to the effort. J.P. Morgan & Co. said its costs will total $250 million. BankAmerica Corp. expects to spend $380 million on the millennium change.

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