Zions is latest regional to announce layoffs
Margin pressure and changing customer behaviors are leading banks to lay off workers in an effort to keep costs down.
The latest to do so was the $70.1 billion-asset Zions Bancorp. in Salt Lake City, which said it will lay off about 500 employees in the fourth quarter.
Others that announced layoffs recently include Huntington Bancshares in Columbus, Ohio, which said late last week that it is planning to cut 150 to 200 employees, and U.S. Bancorp, which said earlier this week that it intends to reduce its branch staff by the "low thousands.”
In a story first reported by Bloomberg, a spokeswoman at Minneapolis-based U.S. Bancorp said that the layoffs would amount to less than 2% of its workforce of about 74,000.
Zions announced the layoffs on its quarterly earnings call Monday. Executives said that severance costs will increase its noninterest expenses by about $25 million in the fourth quarter.
“We believe this will enable us to achieve our previously stated outlook for noninterest expense for next year, which is to hold expenses to flat to down when compared to this year,” Zions Bancorp. Chairman and CEO Harris Simmons said. “Despite the efforts to reduce costs, we'll continue to invest in enabling technologies which will help to ensure our success in an increasingly competitive marketplace.”
The declining interest rate environment has put pressure on bank margins, while shifting consumer preferences mean that banks still need to invest in technology to stay competitive.
Against that backdrop, it’s likely that other banks may also go the route of reducing headcount to cut costs, said Scott Siefers, an analyst at Sandler O’Neill.
“Over a period of time, it’s going to mean fewer branches, smaller branches, fewer employees at the remaining branches with the savings from those cuts being largely reinvested into newer digital offering,” he said. “These are industry dynamics.”
Zions President and Chief Operating Officer Scott McLean said Monday that about 30% of the layoffs will be in customer-facing roles, with the remainder in back-office and enterprise functions. Zions has around 10,000 employees across 11 Western states. McLean said that Zions will also close some branches in the fourth quarter and early next year, but he did not specify how many or where those would be.
“We're relocating some branches, but we'll bring our total level of branches down by a very modest amount,” he said.
Declining interest rates were a drag on Zions’ earnings in the third quarter. Although its earnings per share of $1.17 beat analysts’ estimates, its profit declined slightly and its net interest margin narrowed 15 basis points from a year earlier to 3.48%.