Magazine article American Banker

Webster Seeing More Chances to Cut Than Grow

Magazine article American Banker

Webster Seeing More Chances to Cut Than Grow

Article excerpt

After completing a review of its operations, Webster Financial Corp. said Tuesday that it will be much easier to cut costs than to cultivate revenue opportunities as it looks to boost pretax earnings by $50 million a year.

James C. Smith, the $17.2 billion-asset Waterbury, Conn., company's chairman and chief executive, said it had no preset requirements for the OneWebster initiative, but it had hoped the effort would cut about 10% from its expense base.

After completing the six-month review, Webster should be able to trim about $40 million of costs, or about 8% of last year's total, over the next two years, mostly by cutting 9% of its positions, Mr. Smith said in an interview Tuesday.

"The important thing was to have sustainability with financial discipline on the operating side," he said.

Finding ways to boost revenue was more "challenging," Mr. Smith said, but Webster hopes for an increase of $10 million, or roughly 1.5% of last year's total, in the next two years.

It plans to accelerate some price increases and expand certain programs, such as offering interest rate swap services to clients with as little as $500,000 of outstanding loans. The threshold for such services had been $1 million. "These were things we hadn't previously pursued," he said.

Webster also found it will need to spend money before it starts saving any, saying it will record $13.1 million of charges, including $7.6 million this quarter, to cover severance and implementation expenses for cutting 240 positions over two years.

About half of the cuts will come by eliminating jobs that have been left open since a hiring freeze was implemented in January, Mr. Smith said.

The relative lack of revenue opportunities raised a few eyebrows Tuesday.

Gerard Cassidy, an analyst at Royal Bank of Canada's RBC Capital Markets, said in an interview Tuesday that the review "has a lot of expense for not including a lot of significant revenue opportunities. …

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