SALT LAKE CITY — Utah-based Zions Bancorporation will lay off 5% of its workforce and is planning to close a “modest amount” of bank branches to keep its expenses in check, its top executives announced during a teleconference with investors Monday afternoon.
The company, which oversees Zions Bank in Utah, Idaho and Wyoming, as well as banks in Arizona, California, Colorado, Nevada, New Mexico, Oregon, Texas and Washington, employs about 10,000 people across those 11 states. That means approximately 500 people across those states would be laid off.
Exact details of layoffs and closures, including how many employees and which branches will be affected, weren’t disclosed during the 50-minute meeting; however, the layoffs are expected to be completed by the end of 2019, Zions Bancorporation CEO Harris Simmons said during the call.
James Abbott, director of investor relations for Zions Bancorporation, told KSL.com on Tuesday that most, but not all, of those receiving pink slips will be kept on through the end of the year and that layoffs will be scattered across the company.
"It is impacting all of the major categories within the company from finance — where I kind of live and work, which includes accounting — to technology, to lending, to branch employees and so forth," he said. "It touches employees both on the frontlines — meaning the customers to some degree — and it also affects employees who are behind the scenes."
During Monday's conference call, Simmons explained the 5% reduction will come off of salary and benefits expense total, which Abbott said equates to approximately 5% of the workforce as well. A report released Monday to coincide with the conference call noted the company expected to pay about $25 million in severance charges and other expenses related to the planned cuts.
“We’re not going to give you a precise number, but that would get you into the ballpark,” Simmons said, regarding the exact number of staff layoffs.
Scott McLean, Zions Bancorporation’s chief operating officer, said 30% of the total layoffs would be from “customer-facing” positions, while the other 70% would be “other enterprise activities and back-office activities.”
Many employees found out their upcoming job loss this week, Abbott added.
As for branch closures, he said some branches would be relocated while the total would be brought down by a “very modest amount.” One of those bank closures was in Sandy that had already been previously announced, according to Abbott. He said the other closures will be outside of Utah.
“We believe this will enable us to achieve our previously stated outlook for non-interest expense for next year, which is to hold expenses to flat to down when compared to this year,” Simmons said. “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.”
The announcement came as the company announced its third-quarter results to employees and investors. Overall, it finished off the quarter with $214 million in net earnings and $1.17 earnings per diluted common share during the quarter. The net earnings total was slightly down from the same time last year, but the diluted common share number increased from $1.04 during the third quarter in 2018.
Abbott explained that the upcoming layoffs are a part of a plan to keep future expenses in line with future revenues. He said the company currently has a "healthy" level of profitability that he said he wouldn't describe as either strong or weak.
However, declining Federal Reserve interest rates mean declining revenues for most banks across the nation. For Zions, gross profit margins have compressed about 5% over the past six months and that number is expected to continue to fall in the future, Abbott said. He added laying off employees was "a very difficult decision" to cut expenses and keep the company healthy.
As for the future of the company, Simmons said on Monday's call that he was optimistic about the company’s success in the future. Abbott also noted Zions Bancorporation's capital, credit quality and liquidity remain very strong heading into the final months of 2019 and into 2020.
“We’ve long been committed to achieving stronger revenue growth and expense growth, also referred to as positive operating leverage. In the period of falling interest rates, our ability to achieve positive operating leverage becomes more difficult,” Simmons said. “Over the long term, we’ll remain focused on delivering positive operating leverage — although we recognize that this challenge will increase as our operating efficiency improves.”