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This story appears in the December 2008 issue of Cards&Payments.
The economic crisis and merger madness that began to grip banks this fall will result in cutbacks that could reduce employee headcounts at card-issuing companies by 10% to 20%, observers say.
JPMorgan Chase & Co. this month will announce personnel cuts associated with its recent acquisition of Washington Mutual Inc., which counted about 3,500 employees at its Seattle headquarters and in other offices. Chase planned to notify employees by Dec. 1 whether their jobs would continue or be eliminated because of redundancy or overlap in the new, consolidated organization, a Chase spokesperson says.
Chase has said there could be as many as 400 potential branch closings, but the company provided no geographic breakout.
Wells Fargo & Co.'s acquisition of Wachovia Corp. also could trigger layoffs because of job duplication, observers say. Wells declined to discuss possible layoffs or branch closures.
Issuers hit hardest by the economic downturn are not waiting to issue pink slips. American Express Co. last month announced it will cut 10% of its global workforce, or 7,000 jobs, before the end of this year. The job cuts will occur across all business units.The company also said it has instituted a hiring freeze, and there will be no management-level salary increases next year.
Capital One Financial Corp. also is said to be planning cutbacks as the industry retrenches, but the company would not confirm it.
Clark R. Beecher, a managing director and executive recruiter at Houston-based Magellan International LP, which consults with major credit card issuers, says Citigroup Inc. and AmEx are under particular pressure to cut personnel to survive in the tough economic climate because their overhead is perceived as being higher than average. And the first wave of cuts may not be the last, he says.
"We will see a lot of layoffs this year, then one or two more waves of cuts next year," Beecher says.
Card issuers likely will trim personnel at all levels, including call centers and back-office support, but they also will rely on routine attrition to reduce staff sizes, analysts say.
"Attrition in the production side of the card industry–the support functions from the back-office throughout the organization–is 35% to 40% a year," says Brian Riley, research director with Tower Group. At the middle-management level, turnover is about 20%. It is much less among senior-level executives.
With layoffs also come opportunities for some executives at acquired or reorganized card-issuing companies.
For example, Chase dismissed most top WaMu executives shortly after the acquisition, but Anthony F. Votuo, who last year was named president of WaMu's credit card business, retained a job with Chase, where he has roots. Votuo previously was vice chairman and chief financial officer at Providian Financial, which WaMu acquired in 2005. Before that, Votuo was president and chief operating officer of First USA Bank, Chase's credit card subsidiary under its former Bank One Corp. identity.
"Executives at companies that are in trouble are not going to keep their jobs. But when the new organizations take shape, new opportunities will emerge for card execs, even for some of those whose companies are in trouble now," Beecher says. CP
