Chase Will Cut 4,500 Jobs, Focus on Profit Areas

Chase Manhattan Corp., the largest U.S. bank, said it will cut 4,500 jobs, or 6.5% of its staff, to reduce costs and invest in more profitable businesses.

The bank will take a $320-million charge in the first quarter to pay for the cuts, its second round of firings since the 1996 merger of Chase and Chemical Banking Corp.

Chase will fire about 2,200 employees, and the remaining cuts will come from leaving vacant positions unfilled, President Thomas Labrecque said.

The bank also said it plans a 2-for-1 stock split and will increase its quarterly dividend by 16% to 72 cents.

The news sent Chase shares up $6.44 to close at $135.75 on the New York Stock Exchange.

The staff cuts are part of Chase’s goal to increase revenue 10% a year and return at least 18% on shareholders’ equity, Labrecque said.

“They’ve been criticized because expenses were growing faster than revenues,” said Thomas Hanley, an analyst at UBS Securities. “The knife cut deeper than I thought.”

Chase expects the reductions to result in savings of $460 million annually. The bank plans to use some of the savings to expand staff in corporate banking, in its national consumer business and in Chase Technology Services, which includes global cash management.

“Those businesses are growing at 8% a year, and we have a need to continue to leverage the market positions we have,” Labrecque said.

The bank also plans to expand in mergers advice, junk bonds and equities, as well as to continue to build its mortgage servicing, credit card and online banking businesses, he said.

Analysts said the cuts illustrate that banks can’t afford waste at a time when competition is increasing in the financial services industry.

“The idea is to spend smarter, not less,” said David Berry, a bank analyst at Keefe, Bruyette & Woods. Berry expects the Chase cuts to come from support positions, such as the human resources or legal staffs.