Utah's biggest bank, First Security Corp., last week announced the results of Project Vision, an intensive search it began six months ago for ways to cut costs and become more competitive.
The $12.7 billion-asset bank said its plans for 1996 include $51.4 million of cost savings and a 23% reduction in its full-time staff of more than 6,700. First Security also expects to increase fees by $10.5 million.
Analysts said the results were largely in line with what had been expected. They, along with bank officials, added that if First Security is successful in making the changes, it will improve its chances of staying independent.
"Certainly, if someone looks at us on the Vision redesign effort, and makes an offer representative of the intrinsic value of the new First Security, we would have to consider that," said Spencer F. Eccles, First Security's chairman and chief executive.
But, Mr. Eccles added, a sale "is not our purpose. We truly believe we can create higher shareholder value by remaining independent." He spoke at a news conference in Salt Lake City, where the bank is based.
First Security started the cost-cutting and corporate redesign effort in August with help from Aston Limited Partners, a New York-based consulting firm. Aston uses an intensive cost-cutting model similar to that of another well-known consultant, Chandrika Tandon of Tandon Capital Associates Inc., which has helped such banks as Fleet Financial Group Inc. with high-profile cost-cutting efforts.
Indeed, the head of Aston, Paul Allen, had at one time been a partner of Ms. Tandon's.
According to First Security, bank employees came up with 7,000 ideas for cutting costs, of which 2,800 will be used. Savings are expected to come from changes in business processes, closing 17 of First Security's 271 branches, getting more volume discounts from vendors, and improving some computer and back-office operations.
For example, the bank will create a central telephone center for all of its branches, rather than having customers call the branches directly. The bank will also use more outside vendors for computer programming work.
First Security also intends to have each of its bank subsidiaries in six states sell the same products and operate as if they were a single bank. Its Idaho bank charter will be merged into its Utah bank charter, so that the two bank subsidiaries legally become one.
First Security expects the changes not only to cut costs, but also to allow it to collect more fees for services.
After taxes, the savings are expected to be $37.8 million. The bank also said it will take a restructuring charge of $27.7 million for the fourth quarter.
Nearly three-quarters of the cost cuts will come from staff reductions. Only 1% will come from office closings.
First Security expects that by 1997 its earnings per share will increase 74 cents because of the effort. It also expects its efficiency ratio - the percentage of revenues consumed by noninterest expenses - to drop to 57% from 64.7% in the third quarter. The bank also expects its return on equity to increase 3.72% and its return on assets to rise 0.31% in 1997.
These ratios also may be affected by a planned buyback of up to 2% of the bank's stock annually. In the third quarter, First Security's return on equity was 15.35% and its return on assets 1.23%.
Mr. Eccles acknowledged that he was "saddened by the upcoming departure of some of our employees."
But analysts said First Security needs to make the cost cuts to stay independent. First Security's ranking as the largest independent bank in the Rocky Mountain region makes it an attractive acquisition candidate.
Such an acquisition would bring to an end a colorful history. First Security claims to be the country's oldest multistate bank holding company. It was founded 67 years ago by Mr. Eccles' uncle, Marriner Eccles.
Marriner Eccles was chairman of the Federal Reserve Board under Franklin Roosevelt.