First Chicago NBD Corp. employees milling about at the First National Plaza in the Loop on Monday generally expressed two reactions to the news their employer was merging with Banc One Corp. of Columbus, Ohio: “Thank God it’s not NationsBank” and “What else is new? We’ve been through this before.”
The First Chicago-Banc One marriage will combine First Chicago’s 35,000 employees and Banc One’s 55,000 workers for a total of 90,000, raising the specter of potential downsizing. In a question-and-answer notice issued by the company to its employees, First Chicago acknowledged some jobs would eventually be lost, but indicated attrition and “redeployment” over time would help the merged banks make many of the necessary staff reductions rather than immediate firings.
What’s unclear is how much and where redundancy will emerge once the banks merge, and how many jobs eventually will disappear.
Randall Kroszner, professor of economics with a specialty in banking at the University of Chicago’s Graduate School of Business, said, “Although there is branch overlap . . . it is not as though one is going to swallow the other. It’s as if two healthy people are sitting down to eat together.” The two banks are ready to work together, he said.
Banc One’s reputation is a far cry from that of NationsBank Corp., of Charlotte, N.C., which also announced a merger Monday with BankAmerica Corp. of San Francisco, Kroszner said. Banc One does not have a “slash-and-burn reputation. They have a tradition of buying smaller banks and nurturing. They’re not NationsBank, the tough guy that buys and cuts costs,” he said.
Pete Hisey, editor of Credit Card News in Chicago, said “there are certainly going to be redundancies” in the two banks’ credit card operations, “but I don’t expect a massacre at First Chicago. They’ll work it out.”
First Chicago spokesman Tom Kelly said Monday that there was no specific information on the possibility of job cuts. But the bank did address the issue in a Q&A posted at 2 a.m. Monday on e-mail bulletin boards and the intranet.
One of the questions: “How many jobs will be cut?”
The reply: “Initial estimates call for a 9 to 10 percent reduction in overall operating expenses, although many of the position reductions will be achieved through attrition and redeployment over the next few years.”
Kelly said that translates to cutting $930 million in costs at the merged company. The crucial credit card operations–which contributed 19 percent of earnings–will take a $130 million cut, he said.
The merger will make the new corporation second only to Citibank in numbers of credit card receivables and accounts. Hisey said the combined banks will have $60 billion in credit-card receivables and 50 million cards.
“Credit cards are a big part of First Chicago,” said Marcus Alexis, economics professor at J.L. Kellogg Graduate School of Management at Northwestern University. “If the new (combined) company wants to have the same kind of presence, it could mean an expanded role for the First Chicago (credit operations) players. They’re the ones with the skills, and if there’s learning to do, First Chicago will be doing the teaching.”
How targeted cost-cutting will hit employees remains unclear. Banc One did not return calls concerning the issue. But during a conference call with analysts, executives of both banks repeatedly called attention to the lack of overlap in their operations.
However, Illinois has 165 First Chicago NBD branches and 53 Banc One branches, while Indiana has 197 First Chicago NBD branches and Banc One with 127 branches.
Employees at First Chicago said they had been told not to comment on the merger, but were willing to talk about it as long as their names were not used. Several said they had a “positive feeling” because of lack of overlap. One employee said the merger “is a good thing. It was going to happen anyway, and NationsBank would be disaster, would swallow us.”
Kelly downplayed any suggestion of mass job cuts. “You want to use attrition as much as you can,” he said. He noted that half of the 1,700 jobs eliminated over 18 months after First Chicago merged with NBD in the 1995 merger were by attrition.
The Q&A that the bank distributed electronically to employees also said “benefits will remain unchanged through at least the end of 1998. A common benefits package will be designed so that ultimately we will have the same benefits across the corporation.”
Kelly said an employee stock purchase program that went into effect Oct 1, 1996, will not be affected.
