B of A may emerge healthier
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December 12, 1996: 8:29 p.m. ET
Analysts say BankAmerica job cuts will pave path to productivity
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NEW YORK (CNNfn) - BankAmerica has been on a buying binge, taking over Security Pacific, Sea First, and Continental Illinois. Along the way, it's been following an industry pattern: merger, followed by consolidation, followed by downsizing, which is often followed by new acquisitions.
The pattern applied in California, when Wells Fargo took over First Interstate, and in New York, after Chase absorbed Manufacturers Hanover and merged with Chemical.
"Once the dust settles, these companies become much more growth oriented," said James McDermott, president of Keefe, Bruyette & Woods. "They in fact become healthier, more profitable, they have larger market capitalizations, which enable them to go out, buy other businesses which provide high returns and enable them to maintain a high- return profile."
BankAmerica will shed 3,700 jobs, or four percent of its 93,000 employees world-wide. The bank expects to shed the jobs in 1997 and recover the extra costs in 1998.
In Europe, it will shift staff from money centers to emerging markets. In Japan, it will grow capital market activity, and in California, it will close 120 branches while opening new ones in lucky supermarkets.
Carol Berger, bank analyst for Salomon Brothers, said "this is their way of making things more productive, to enhance profitability and drive up earnings per share."
(122K WAV) or (122K AIFF)
Bank consolidation has been notably aggressive in California. But banks nationwide have been cutting costs to match lower-cost competitors.
California giant Wells Fargo isn't BankAmerica's only big competition.
Lower-cost competitors include mortgage companies, credit card companies, mutual funds, and corporate bond houses
all trying to grab business from stodgier banks and pressuring banks to cut costs.
BankAmerica shares Thursday lost $3.25 to $94.00.
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BankAmerica Corp.
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