ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, January 25, 1996 TAG: 9601250035
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: LOS ANGELES
SOURCE: Bloomberg Business News
Wells Fargo & Co.'s plans for massive firings and branch closings as it swallows First Interstate Bancorp shows how brutal mergers sweeping U.S. banking can be.
Even before its announced purchase of First Interstate for $11.6 billion, Wells Fargo President Bill Zeundt said the bank would eliminate up to 85 percent of First Interstate's 5,900 California jobs as it closes 350 of 450 branches.
The deal, creating a bank with combined assets of $108.4 billion, shot down a rival agreement by First Bank System Inc. of Minneapolis to acquire Los Angeles-based First Interstate. Because of less overlap in sales territory, that merger would have led to fewer branch closings. But the offer also was $1.6 billion below the Wells Fargo bid and First Bank declined to up the ante.
Wells Fargo executives wouldn't say Wednesday exactly how many jobs will be lost, but Wall Street analysts estimate roughly 7,000 of the 42,000 employees of the two banks will go. Many of the cuts will come through attrition, though Wells Fargo said it will have to fire workers as well.
``It's devastating for all First Interstate employees,'' said Gus Romero, a 28-year-old teller who's worked at First Interstate since he was 18. ``You work for a place for 10 years and one day you discover you don't have a job. I wish there could have been another way.''
Bankers say they have no choice but to seek out mergers to survive as they compete with mutual funds, brokers and other financial service firms with lower costs that vie for consumers' wallets. And with 10,400 banks - compared with about a dozen in Canada - the United States is overbanked, they say.
U.S. banks - which employ about 1.5 million people - will lose an estimated 450,000 jobs in five to 10 years to increased competition, according to Deloitte & Touche LLP.
``You can't sugar-coat it,'' said First Interstate Chief Executive William Siart, one of the employees who will be dismissed. ``Our industry will be going through a consolidation, and it will continue to go through that to remain competitive.''
Not everyone is losing out in the merger planned by Wells Fargo, or by other big banks.
First Interstate shareholders will get $152.40 a share from Wells Fargo, 43 percent more than their stock was worth when the original offer was made Oct. 18. Investors will continue to profit, analysts say, as Wells Fargo's plans to slash costs by $800 million a year boosts the bottom line.
First Interstate's top 39 executives who may get fired also will be enriched by the merger, since recently adopted severance provisions assure them a total of $29 million in severance. Siart tops that list, with a guarantee of $4.57 million.
Tellers and most other employees who receive pink slips will get four weeks' pay for each year of service, with a maximum of two years for longtime employees.
``The package will help, but it won't help for too long,'' said Romero, who expects to be fired as layoffs begin.
The Associated Press contributed to this story.
LENGTH: Medium: 66 lines ILLUSTRATION: PHOTO: AP. The signature stagecoach of Wells Fargo & Co. in theby CNBlobby of its San Francisco offices recalls the bank's history in the
taming of the West. color.