Shawmut to Cut Staff, Branches; Profits Drop 16%, to $36 Million

By Vogelstein, Fred | American Banker, April 20, 1993 | Go to article overview

Shawmut to Cut Staff, Branches; Profits Drop 16%, to $36 Million


Vogelstein, Fred, American Banker


In a signk that the New England economy remains sluggish, Shawmut National Corp. said it took a $36 million special charge in the first quarter to cut about 5% of its work force and shutter 50 branches.

Shawmut, New England's third-largest bank company, also said that it set aside $20 million to accelerate the sale of bad real estate assets with a face value of $300 million.

The announcements came as Shawmut reported its first-quarter profits of $36.3 million fell 16% from the year-earlier quarter, but were three times greater than in the fourth of 1992.

Although earnigs were in line with analysts' estimates, many voiced concern over the pace of loan growth, which they expected to be more vigorous.

Loan "volume appears to be less than we might have hoped for," said Thomas Theurkauf, an analyst at Keefe Bruyette & Woods Inc.

500 Jobs to Be Cut

Shawmut, which has $25 billion in assets, said it would cut 500 jobs and close about 50 branches in Connecticut, Massachusetts, and Rhode Island by the end of the year. It said the move should result in $50 million of annual savings by 1994.

The company, which has cut 2,400 jobs in the past three years, ended the quarter with about 10,600 employees.

In addition to the other charges, the company took a special charge of $14 million to write down the value of its mortgage servicing rights that lost value because of faster-than-expected mortgage prepayments.

Partial Offset

Shawmut partially offset the special charges with a $53 million accounting gain from adopting Financial Accounting Standard 109, which permits accelerated recognition of tax benefits.

Shawmut's stock fell $1.125 to $22.625 in late trading, on a day when many bank stocks lost value.

Mr. Theurkauf and several other analysts said they planned to lower their estimated earnings for Shawmut this year and next.

Trouble Reinvesting

Like many other companies, Shawmut reported improved credit quality. Its nonperforming assets fell 10% to $777.1 million. The company said the bulk sale, expected to close by the end of the second quarter, should shrink its nonperforming portfolio by another $250 million to $300 million.

Unlike many of its bank peers, Shawmut's net interest margin fell during the first quarter. …

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