In an ongoing effort to cut costs, Bank One Corp. plans to eliminate up to 800 positions in its First USA credit card unit and vacate a 200,000-square-foot customer-service facility.
The continued cost-cutting campaign follows the trimming of 2,690 jobs, or 3.4 percent of the Chicago-based banking company’s workforce, in the third quarter. And Chief Executive Jamie Dimon has said more cuts are coming as he attempts to turn around the ailing bank he took over in March 2000.
About 750 of the First USA jobs will be eliminated by June, when it closes a customer-service center in Tempe, Ariz., that the company says is no longer needed because of improvements in First USA’s overall customer service. Another 50 jobs will be cut from First USA’s technology department in Wilmington, Del.
Up to half the jobs will be relocated within the company, said spokesman Thomas Kelly. It will be up to displaced employees whether they want to move to remain with the company.
By internal measures, customer satisfaction among First USA customers has risen to 80 percent from 65 percent two years ago. Customer service and pricing problems at the credit card giant in 1999 helped spark a downward slide in Bank One’s earnings and stock price, which have not fully recovered.
Loan charge-offs surge: Smarting from the economic downturn, the banking industry saw loan charge-offs rise again in the second quarter, according to the Federal Deposit Insurance Corp.
Banks wrote off $7.9 billion in bad loans during the quarter, up 50 percent from the year-earlier quarter. The greatest deterioration in credit quality came in commercial and industrial loan portfolios at larger banks.
Non-current loans–those 90 days or more past due–also increased for the industry by 33.1 percent from the 2000 second quarter, to $20.8 billion.
Still, insured commercial banks reported net income of $19.2 billion in the second quarter, a 31 percent improvement over the same period a year earlier.
But last year’s second quarter included sizable restructuring and credit-related charges at a few large banks. The lack of such charges in the second quarter this year accounted for almost all of the improvement in net income.
Harris earnings fall: Chicago-based Harris Bank reported net income of $60.2 million for the third quarter, down 4.6 percent from $63.1 million a year ago. Although net interest income grew 19.5 percent, to $195.2 million, the bank nearly quadrupled its provision for loan losses, to $28.3 million.
Harris Bank, owned by Bank of Montreal, also experienced heavy loan losses. Net loan charge-offs rose to $30.4 million in the third quarter, compared with $3.3 million in the same period last year.
Non-performing assets–loans whose payments are overdue–were $208 million, or 1.3 percent of total loans, on Sept. 30, up from $96 million, or 0.6 percent, a year ago.
For the first nine months of 2001, Harris posted net income of $185.9 million, down 12 percent from $210.3 million in 2000. The year-ago period included a $29.7 million after-tax gain on the sale of the corporate trust business.
