Wachovia Corp.'s brokerage transferred 1.6 million customer accounts from the former Prudential Securities to its own systems over the Labor Day weekend - a milestone in a drive to save $364 million a year through the year-old joint venture.
Wachovia Securities LLC of Richmond, Va., was formed in July 2003, when Wachovia Corp., of Charlotte, and Prudential Financial Inc. of Newark, N.J., merged their brokerages. Wachovia owns 62% of the venture, which is part of Wachovia's capital management division; Prudential owns 38%.
Wachovia changed signs on the former Prudential offices and began using its name in most correspondence with Prudential customers a year ago. In the conversion last weekend, those customers got Wachovia account numbers and statements.
The conversion also means that Wachovia Securities can start achieving long-awaited cost-cuts from the deal, in part by shutting down Prudential's back-office operations in New York.
Tony Mattera, a Wachovia Securities spokesman, said it plans to "gradually" lay off the approximately 1,000 Prudential employees that remain there over the next two quarters. About 1,000 of the back-office jobs have already been moved from New York to Richmond, and about 800 of them have been filled, some with former Prudential employees who moved to Virginia, he said.
"You will start to see more of an impact" from the savings "in the fourth quarter of this year and the first quarter of 2005 as we wrap up the integration," Mr. Mattera said.
Jason Goldberg, an analyst at Lehman Brothers, said Wachovia is probably counting on the expense cuts to bolster earnings after a slow summer in brokerage.
"Retail brokerage activity has been soft in the last four months or so, so we're comforted by the fact that the company will benefit from the merger saves," Mr. Goldberg said. "We're looking for $364 million of cost savings, of which they really haven't gotten much so far."
However, the venture is "proceeding as planned," he said. "So far, so good."
Wachovia has said it expects to eliminate a net total of 1,750 jobs and close 153 retail brokerage offices; 320 jobs, or 18% of the total, had been cut as of June 30. Wachovia has closed 78 offices so far.
"We are on track to achieve the projected cost saves from our retail brokerage transaction," G. Kennedy Thompson, Wachovia Corp.'s chief executive, told investors during its second-quarter earnings conference call July 15.
During that call, Wachovia's chief financial officer, Robert Kelly, said he expects one-time start-up costs from the joint venture to be about $1 billion, or $100 million less than previous estimates.
The brokerage has 5.4 million accounts and about 700 offices nationwide. It also has brokers in about 2,700 Wachovia bank branches on the East Coast.
