Huge Layoffs Expected After the Deal : Jobs: As many as 20,000 may lose employment as banks combine staffs and close offices.
The merger of BankAmerica Corp. and Security Pacific Corp. could mean some of the most massive banking industry layoffs in recent history, with as many as 20,000 workers--more than 20% of the two banks’ employees--losing their jobs and several hundred branches becoming targets for closure, analysts say.
The banks won’t yet say how many people they expect to lay off. But because 60% to 70% of typical bankcosts consist of salaries and benefits, experts say the $1 billion that the companies boast they will save by merging translates into thousands fewer jobs.
“They’ve got to be talking 15,000 to 20,000 jobs,” said J. Kimball Dietrich, an associate professor at the USC School of Business Administration. Everyone from tellers to data processors to middle and senior managers is likely to be affected, experts said.
Repercussions of the merger will be felt from South Central Los Angeles to Alaska.
The merger could reduce opportunities for recent high school and university graduates facing an already bleak job market in California and reduce services to underserved and poor areas of Los Angeles. Branch closures could feed the commercial real estate glut. Workers laid off because of the deal will join the ranks of the more than 30,000 U.S. financial industry workers who have lost their jobs this year or are about to, as a result of mergers or corporate retrenchment.
When Chemical Bank and Manufacturer’s Hanover announced plans to merge last month, they said 14% of their work force--or 6,200 people--would lose their jobs. The planned merger of Charlotte, N.C.-based NCNB and Atlanta-based C&S;/Sovran banks are expected to result in up to 6,000 layoffs.
And Citibank, the nation’s largest bank, announced last month it would be letting go 10,000 workers on top of 7,000 layoffs earlier this year.
Because bigger banks are merging, the job losses this summer are far larger than in previous waves of bank combinations. Five years ago, when Wells Fargo Bank merged with Crocker Bank, 4,000 jobs and 168 branches were lost.
And this is just the start of what could be an avalanche of job losses in banking as the industry consolidates in what some analysts consider a long-overdue streamlining. There could be 300,000 more layoffs in banking in the next five years, according to Emanuel Monogenis, head of the financial institutions practice at Heidrick & Struggles, one of the nation’s biggest executive search firms.
“There are too many banks chasing too few customers,” he said. “It’s like the auto industry a few years back. Banks are retooling at a time of less demand.”
Soaring prices for BankAmerica and Security Pacific shares indicated that Wall Street expects the two banks to carry through with significant cost cuts. “They will have to be close to ruthless in reducing expenses,” Monogenis said.
In locations across California, Bank of America and Security Pacific branches are literally across the street or around the corner from each other. Analysts say there are more than 300 locations served by competing branches of the two banks where one or the other could be considered for closure.
“The first thought that crosses your mind is, ‘How long am I going to be here,’ ” said a teller at a Security Pacific branch in San Francisco who asked not to be identified. “They just said, ‘changes will be made.’ You’re left hanging, because they tell you a whole lot of nothing.”
The merger is bad news not only for current employees, but for recent high school and college graduates, who will find that two of their biggest potential employers won’t be doing much hiring.
“Banks have typically hired a lot of our students,” says USC’s Dietrich.
The Los Angeles school district, too, has training programs to prepare graduates specifically for bank jobs.
“They hire a lot of high school graduates (and) provide a lot of part-time jobs and opportunities for women and minorities,” Dietrich said.
Beyond Los Angeles, the consolidation could also affect subsidiaries of the two banks in other states.
A spokeswoman for Security Pacific said there “will be some redundancies and consolidation” among the 1,300 branches of BankAmerica subsidiaries in nine Western states and the 987 branches of Security Pacific subsidiaries in seven states in the region.
The two largest banks in Washington, for example, will combine some of their branches as a result of the merger; Seattle-First National Bank is owned by BankAmerica, and Security Pacific Bank Washington is a subsidiary of Security Pacific Corp.
For most customers, the picture is not as bleak as for employees.
Except for a few potential glitches as the banks coordinate their computer systems, analysts don’t expect a lot of changes in the short run.
In the Larchmont Village shopping area near Hancock Park, where Bank of America and Security Pacific branches face each other across a street neatly lined with shop awnings, Ethel Wilkoff said she had been banking at Security Pacific since 1962. But Monday, she walked across the street to do a transaction at Bank of America.
“I imagine I’ll be banking here from now on,” said Wilkoff, who had heard about the merger on the radio and happened to have business to do at B of A. “I have confidence in Bank of America too.”
While customers have little to be concerned about in affluent areas like Larchmont--where there are at least four banks and savings institutions on one block--branch closures in poorer neighborhoods could leave a bank a long bus ride away for many people. Community leaders are apprehensive that areas already under-served by banks will lose even more of the few they have. For instance, the 40-plus square miles of South Central Los Angeles--home to more than 257,000 mostly low- and middle-income people--are served by just three banking firms now: First Interstate, Bank of America and Security Pacific.
Inner-city leaders are also worried about jobs. Selwyn Whitehead, executive director of the Greenlining Coalition, a San Francisco-based organization of 40 minority and women’s groups that follow banking issues, said she is concerned that any layoffs may disproportionately affect women and minorities in the banks’ upper-management ranks.
“There’s a direct correlation between a bank’s hiring practices in their senior ranks and their commitment to lending in minority communities,” Whitehead said. So her coalition will keep a close eye on how any layoffs are handled.
The merger could also have a major impact on commercial real estate markets.
If hundreds of branches indeed are closed, “there should be a tremendous amount of real estate that’s let go,” says Richard Sprayregan, a partner at the Kenneth Leventhal & Co. accounting firm.
Times staff writers Jube Shiver in Los Angeles and Richard C. Paddock in San Francisco contributed to this story.
The Biggest Bank in the West The union of California’s two largest banks, BankAmerica Corp. and Security Pacific Corp., would create a U.S. banking company that is second only in size to Citicorp in New York. The new entity would have assets of about $190 billion and branches throughout the West.
Total Branches by State Washington BA: 198 S: 163 Oregon BA: 65 S: 47 Idaho BA: 9 S: 11 California BA: 854 S: 629 Nevada BA: 21 S: 25 Utah BA: 2 Arizona BA: 110 S: 103 New Mexico BA: 44 Texas BA: 19 BANKAMERICA CORP.
Founded in 1904 as the Bank of Italy by A.P. Giannini. The bank changed its name to Bank of America in 1930. Operates 1,322 branches in the United States and facilities in 36 countries. Employees -- over 55,000 Stockholders -- 136,914 Headquarters -- San Francisco Monday stock close -- $40.00, up $2.67 52-week stock range -- $40.37-$17.50 Income Statement Amounts in millions (Six months ended June 30)
1991 1990 Net earnings $554 $545 Assets $113,200 $111,934 Troubled Loans $3,081 $3,100
SECURITY PACIFIC CORP.
Founded in 1871 as the Farmers and Merchants Bank. In 1968, Los Angeles-based Security First National Bank merged with Pacific National Bank of San Francisco, creating Security Pacific. Operates over 980 branches in 7 western states. Employees -- 38,987 full-time as of 6/30/91 Stockholders -- 38,696 Headquarters -- Los Angeles Monday stock close -- $32.12, up $9.12 52-week stock range -- $33.12-$17 Income Statement Amounts in millions Quarter ended June 30
1991 1990 Net earnings $143.2 $383.6 Assets $80,419 $94,510 Troubled Loans $2,645 $1,869
Sources: AP, company reports and Times news reports
A closer look at the deal * It would be a stock-for-stock transaction; each share of Security Pacific stock being exchanged for 0.88 shares of BankAmerica stock on a tax-free basis. * The deal is valued at more than $4 billion, making it the largest U.S. bank merger ever. * The new bank would have $190 billion in assets, surpassed in size only by Citicorp. * It would use the name BankAmerica Corp. with Security Pacific fading into history. * BankAmerica’s Richard M. Rosenberg would serve as chairman and CEO; Security Pacific’s now chief Robert H. Smith would be president and chief operating officer. * Consolidation would save $1 billion annually within three years. * An undetermined number of layoffs and branch closings would be implemented. * The new operation would operate in California, Washington, Arizona, Idaho, Nevada, New Mexico, Oregon, Texas, Alaska and Utah, and 36 countries. * The board of directors would be made up of 15 members of each bank’s current boards. * Must be approved by shareholders and regulators. * Should be completed within six months.
How They Stack Up
BankAmerica Corp. and Security Pacific Corp. announced the largest banking merger in U.S. history on Monday. It will create the nation’s second-biggest banking company with assets of about $190 billion. California Market Share Based on deposits as of March 31, 1991) Bank of America, San Francisco: 2.2% Security Pacific, Los Angeles: 16.4% Wells Fargo, San Francisco: 15.6% First Interstate, Los Angeles: 5.7% Union Bank, San Francisco: 4.7% Bank of California, San Francisco: 27.6% Sanwa Bank, San Francisco: 1.9% Sumitomo Bank of California, S.Fran.: 1.5% City National Bank, Beverly Hills: 1.4% Imperial Bank, Los Angeles: 1.1% All others: 21.9% Source: California State Banking Department Stock Prices Price per share (in dollars) BankAmerica: Monday Close: $40.00, Up $2.60 Security Pacific: Monday Close: $32.12, Up $9.12 Source: Dow Jones Earnings BankAmerica For the first six months of 1991, BankAmerica posted net income $554 million, up from $545 a year earlier Security Pacific For the first six months of 1991, Security Pacific posted net income of $143.2 million, down sharply from $383.6 million in 1990. Source: Company reports
