Chase Manhattan Plans to Cut Costs : Company Aims to Save $300 Million by Restructuring

Chase Manhattan Corp. is planning a restructuring aimed at cutting costs by $300 million and getting profits back on track for the nation’s No. 2 banking company, bank officials said today.

“It is imperative that our overall performance improve in the months ahead. This is a dual challenge,” the company said in a memorandum to top employees. A copy was made available to Reuters.

The memo said the moves are aimed at reducing costs by $300 million in the near-term while boosting revenues.

The memorandum said the restructuring was in response to a business climate “as difficult as any in the history of the global financial services industry.” But it gave few specifics about where the cost-cutting might hit.

The company last week announced a change at the top, with Thomas Labrecque, 51, appointed to succeed Chairman Willard Butcher.

Arthur Ryan, vice chairman who heads Chase’s only thriving sector, consumer banking, will become president.

Speculation grew that Chase will launch its much-needed cost-cutting plan when Labrecque’s elevation was announced.

The plan is expected to include layoffs of several thousand employees, asset sales and a dramatic slimming of the company’s diversified investment banking services, ranging from corporate finance to foreign exchange and government bond dealing operations.

Chase reported disappointing first-quarter earnings of $44 million, down 67% from a year earlier, and increases in non-performing loans, those on which interest payments are late.

Earnings have not been sufficient to even pay for the company’s annual dividend. While profits in recent years have hit some peaks, for the most part they have been disappointing. Chase last year reported a loss of $655 million because of costs associated with poorly performing loans and restructuring charges.

Staff cuts through layoffs and attrition are part of the recovery plan, the sources said.

The company said that Chase’s three-division structure will be consolidated and the number of management levels within Chase reduced.

“We believe this new structure is leaner, better integrated and more market-focused, and will enable us to refine still further our fundamental strategies,” the company memo said.