By SHIRLEY A. LAZO
The chase is on at Chase Manhattan to rev up revenues and cut costs. Tuesday, the nation's No. 1 bank holding company, with over $365 billion in assets and 30 million customers, put numbers on its widely anticipated restructuring. Chase will reduce its worldwide work force by 4,500 jobs, or 6%, and take a first-quarter, after-tax charge of $320 million. At the same time, the company announced a 16% boost in its quarterly common dividend and proposed a 2-for-1 stock split.
All that sent Chase stock soaring by more than six points on the Big Board, to a 52-week high of 135 (Thursday it hit 139 1/8 ). Among happy investors was, no doubt, Michael Price, whose Mutual Shares fund complex (now part of Franklin Resources) owns over six million Chase shares. In a Q&A in these pages February 16, Price said he was "very impressed with how that organization has evolved since the Chemical Banking merger [two years ago] and where they are going." When the merger was disclosed, Chase stock was at 55; it closed out 1997 at 109 1/2. Price views Chase as a "very well-managed bank [that] continues to get better-managed."
The new dividend will be a pre-split 72 cents a share (36 cents post-split), versus 62 cents. It's payable April 30 to holders of record April 6. The 2-for-1 stock division is subject to shareowner approval at Chase's May 19 annual meeting. There are 421.5 million common shares outstanding, 60% of which are owned by institutions.
Chase plans to reinvest the $460 million in annual savings it envisions from its streamlining in businesses where it foresees rapid revenue growth, such as mortgage servicing, asset management and merger-and-acquisition counseling.
About half the job cuts will come through companywide layoffs over the next 18 months. The rest will result from attrition and the extension of a hiring freeze. However, a number of new positions will be created in connection with Chase's savings reinvestment in its growth businesses. (In February, J.P. Morgan said it would eliminate about 5% of its work force, while last fall, Citicorp, the second-largest U.S. bank, announced an 8.3% reduction.)
An additional aspect of Chase's restructuring steps was another round of speculation that it might move to acquire Merrill Lynch, the largest brokerage firm in the U.S., Donaldson Lufkin & Jenrette or PaineWebber. Chase in the past has been linked to all three.
According to First Call, Wall Street thinks Chase will earn $9.58 a share, on average, in 1998 and $10.71 in 1999, versus last year's $8.23. Chase's previously stated performance goals are a return on equity of at least 18%, annual revenue growth of 10% and double-digit growth in earnings. As for Chase's Asian exposure, at year-end '97, less than $100 million out of some $10 billion in loans was nonperforming, and much of that was short term and trade related.