Zions to cut 5% of its workforce, close branches

Zions Bancorporation NA, one of Utah’s hallmark public companies, will cut 5 percent of its workforce and will have what one bank official describes as “a modest trimming” in the number of its bank branches.

The Salt Lake City-based company made no mention of those activities in its news release about third-quarter earnings early last week but its executives discussed them in a subsequent industry analyst teleconference.{mprestriction ids="1,3"}

The 5 percent employee reduction equates to about 500 people. The bank in its 2018 annual report saidthat it had 10,201 full-time-equivalent employees at 433 commercial banking offices in 11 states.

Harris Simmons, chairman and CEO, said during the teleconference that the company had “sharpened our focus” on non-interest expenses in the wake of lower interest rates across the yield curve that have materialized during the past several months.

“Today, we are announcing an acceleration of our drive toward improving operating efficiency, which will result in a near-term workforce reduction of about 5 percent along with other operating expense reductions,” he said. “This acceleration will result in a temporary increase in non-interest expense in the fourth quarter as severance and other similar efficiency initiative-related charges are recognized. … Despite the efforts to reduce costs, we’ll continue to invest in enabling technologies which will help to ensure our success in an increasingly competitive marketplace.”

Paul Burdiss, chief financial officer, said a severance charge of about $25 million will occur in the fourth quarter. “There are other charges related to, for example, branch closures that will occur in the fourth quarter, but those will likely carry over into at least the first quarter of 2020, but I have not specified the size of those items,” he said.

Scott McLean, president and chief operating officer, said about 30 percent of the eliminated jobs will be customer-facing roles, with the remainder being other enterprise and back-office activities.

McLean said the number of closing branches will be “a modest amount.”

“We are absolutely committed to our branch footprint,” he said. “We’re relocating some branches, but we’ll bring our total level of branches down by a very modest amount. We absolutely believe that our customer base — which, as you know, is largely small and medium-sized businesses — most survey data reflects that they absolutely value convenience and locations and they value access to bankers. So, it’s a modest trimming of the branch footprint.”

The third-quarter earnings news release made no mention of the headcount reduction or bank branch closures, although Simmons was quoted in it as saying the company would “continue to take steps to carefully manage operating expenses in the year ahead. We are optimistic that we will be able to manage 2020 operating expenses to a level that is no more than, and likely modestly reduced from, expected 2019 results.”

For the third quarter, Zions reported net earnings applicable to common shareholders of $214 million, or $1.17 per share, which compares with $215 million, or $1.04 per share, for the same quarter a year earlier.{/mprestriction}