Magazine article American Banker

Central Fidelity Copes with the '90S by Slashing Costs

Magazine article American Banker

Central Fidelity Copes with the '90S by Slashing Costs

Article excerpt

"That's one of the few live plants that we still have around the bank," says Lewis N. Miller Jr., pointing to the miniature Japanese bonsai tree sitting on a table in his office.

Mr. Miller, president of Richmond-based Central Fidelity Banks Inc., said the bank recently did away with its plant servicing contract, thereby saving about $150,000 a year statewide.

In its place, employees were provided with their own watering cans or asked to make do with artificial plants.

"A nickel here, a nickel there, sooner or later it adds up," Mr. Miller said nonchalantly.

Low Efficiency Ratio

But the sentiment has become one of Central Fidelity's bedrock credos. The company is obsessed with saving money.

In fact, its efficiency ratio, which measures the percentage of operating revenues eaten up by noninterest expense, was 54.58% last year, the fourth lowest among the nation's larger banks.

"In Central Fidelity's case, it's very much an expense control story," said Anthony R. Davis, a bank analyst at Dean Witter Reynolds Inc., in New York. "They don't waste any motion." Central Fidelity earned $7,749 per employee in the second quarter, compared with $6,400 for the typical bank followed by Dean Witter, according to Mr. Davis.

A Rough Decade

Mr. Miller dates Central Fidelity's fixation on cost control back to 1989, when he and chairman Carroll L. Saine started thinking hard about the future of the banking industry.

"We realized the '90s weren't going to be good for banks," Mr. Miller says. "To continue to be profitable and to grow, you were going to have to be efficient -- get more out of what you've got."

To encourage its employees to buy into the cost-scrimping regime, Central Fidelity makes heavy use of financial incentives.

Last year, after employees succeeded in keeping controllable expenses flat, they received two separate 2% increases in salary. …

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