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Morgan mulls a merger
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February 24, 1998: 1:08 p.m. ET
Bank plans 800 layoffs, considers options in effort to boost its earnings
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NEW YORK (CNNfn) - In the wake of mounting losses in Asia and higher operating costs, J.P. Morgan & Co. plans to cut as much as 5 percent of its work force and confirmed it would consider a merger as a possible "option."
The layoffs represent as many as 800 positions and are expected to occur over the next two weeks. The cuts affect workers from the clerical level to managing directors and are likely to result in a one-time charge in the first quarter.
Word of the layoffs and a possible strategic combination such as a merger were outlined in a memo circulated Monday at the New York headquarters by Chairman and Chief Executive Douglas Warner.
"Stronger financial results must be a priority," the memo said.
For Morgan, the anticipated moves underscore one of its biggest problems. In its attempts to transform itself from a stodgy lender to a major securities firm, Morgan's growth in operating expenses has outstripped the growth in revenue in three of the past four years.
"Strategic combinations, the subject of speculation in the press, are also an option," Warner's memo said.
Last July, Morgan invested an estimated $900 million to help build its mutual fund business by purchasing a 45 percent stake in American Century Cos., then the nation's fourth-largest no-load mutual fund company.
"While targeted moves such as our alliance with American Century may well make sense, it remains our conviction that no strategic merger yet envisioned matches the promise of a our own growth strategy if we execute it successfully," Warner wrote in the memo.
Morgan is the third major bank to cut its staff during the past few months. Chase Manhattan Corp. is in the midst of eliminating about 3,000 jobs, or 4.3 percent of its staff, while Citicorp late last year said it would eliminate about 7,500 jobs, or 8.3 percent.
Responding to the developments, Morgan's shares (JPM) shot up 3-13/16 to 116-1/8 in active trading on the New York Stock Exchange.
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J.P. Morgan
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