Salt Lake City-based First Security Corp. says it has begun a grueling companywide search for ways to cut costs, boost revenues, and improve service.
First Security, which has $12.2 billion of assets, is the biggest bank holding company in Utah. It said last week that it had engaged the New York consulting firm Aston Limited Partners to lead it through the effort, which it calls Vision.
As in the cost-cutting program under way at Chase Manhattan Corp. and the ones completed in recent months at CoreStates Financial Corp., Fleet Financial Group, and U.S. Bancorp, First Security will solicit ideas from all its employees.
The ideas will be evaluated by top executives in November, and the winners will be put into effect next year, said chief financial officer Scot Ulbrich.
But unlike many of these other efforts, First Security is not saying at the outset how much money it hopes to save, how many jobs it expects to cut, or what efficiency ratio it hopes to achieve.
Instead, Mr. Ulbrich said, the company will wait until later this year before announcing its goals.
"We owe it to our customers and our shareholders to examine our current operations and make positive changes for enhanced service and greater customer and shareholder value," said First Security's chairman, Spencer F. Eccles.
Catherine L. Murray, senior bank analyst with J.P. Morgan Securities Inc. in New York, said that success in the effort is critical if First Security is to meet its goal of staying independent.
According to data compiled by J.P. Morgan, First Security's efficiency ratio in the first quarter was 67%, compared to the average among regional banks of 62%. This ratio measures the percentage of revenues consumed by noninterest expenses.
Ms. Murray said that First Security's relatively high costs and the management's repeatedly stated reluctance to sell out to another banking company are the primary reasons First Security's stock is trading below the average for regional banks.
Last week she said the stock was trading at 9.7 times her expected 1995 earnings, nine times expected 1996 earnings, and 1.5 times book value. The average stock price among regional banks is 10.6 times 1995 earnings, 9.5 times 1996 earnings, 1.7 times book value.
If First Security doesn't improve its efficiency, or increase its stock price, it could be forced to accept overtures from other banking companies, she explained.
"They need to improve efficiency to boost earnings, but also to accomplish their goal of remaining an independent banking organization," Ms. Murray said.
According to Mr. Ulbrich, First Security believes strongly that it can and should remain independent.
The Vision project commenced last week, when Paul Allen, the head of Aston Partners, took an office next to the office of First Security's chairman, and all of Aston's employees took up temporary residence in Utah to work with First Security on the project.
Additionally, a working team of 20 high-level First Security executives, led by president and chief operating officer Morgan Evans, is working full time on the project. Another 46 executives have been assigned to spend 50% to 80% of their time drumming up suggestions from First Security employees and getting the ideas ready for evaluation.
First Security's seven-member managing committee, led by Mr. Eccles, will review the suggestions in November, and decide which ones will be put into effect.
Mr. Ulbrich said a principal goal of the effort will be "structuring First Security to be closer to the customers we serve in the ever more complex financial services arena."
But he acknowledged that the company also expects the project to help reduce its efficiency ratio and cut its payroll. Mr. Ulbrich added that First Security has a "long-standing goal" of getting its efficiency ratio below 60%.
Aston was the consulting firm that lead CoreStates on its cost-cutting effort. Mr. Allen, in previous years, has worked closely with Chandrika Tandon, who is the lead consultant in Chase Manhattan's cost-cutting effort.