First Tennessee Bank’s parent company is not yet in a position to report how many of its employees have accepted or will be accepting a voluntary buyout package the company offered last month to about 400 employees.
But so far, it’s looking like First Horizon National Corp. will accomplish its goal of getting at least 40 to 80 employees of that 400 or so as takers.
The company sent out letters in October to the approximately 400 employees targeted who work in “non-customer facing” areas – so, in places like finance and human resources. First Horizon’s expense ratio (basically total expenses divided by total revenue) is still higher than the company would like, and one way to whittle that down is cost savings on the personnel side.
The company’s efficiency ratio in the third quarter was about 78 percent, meaning the company essentially spends 78 cents for every dollar it makes.
“What I will say right now is this: We have communicated to the Street a $50 million cost save,” said John Daniel, First Horizon’s chief human resources officer. “That’s the latest cost save goal we’ve communicated to analysts.
“What we needed (from the buyout program) was something that would give us significant momentum to that $50 million. And I would say that the program is going to be very successful. In other words, enough people are going to take it.”
The company is viewing the buyouts as a creative attempt to improve the health of its balance sheet by using a scalpel instead of a sledgehammer. To be sure, widespread layoffs are the norm in the industry right now, with Reuters reporting in recent days that major banks have announced nearly 160,000 job cuts since the beginning of 2011.
Some context about the Reuters numbers: the job cuts were more pronounced outside of the United States. Also, Reuters noted the figure may be overly conservative, as smaller banks and brokers cut staff or close.
Meanwhile, all of that comes in large part because profit margins are getting squeezed from all sides, via such things as the higher cost of regulatory compliance and the low interest rate environment.
First Horizon, the parent of the largest bank based in Tennessee, is in the midst of broad cost savings and performance improvement targets. It’s in an effort to demonstrate sustained profitability to analysts and investors and that the bank can successfully remake itself into a leaner, more narrowly focused operation than the sprawling, multi-state financial supermarket it was during the boom years.
“Most of the people accepting the buyout package so far are doing it with pretty positive feelings,” Daniel said. “They’re not looking forward to leaving the company. But they understand the challenge the company has, the cost save goal we have to get to in these non-customer facing areas, and they thought this was a fair and generous way to make this transition as smooth as possible.
Daniel added that all 400 or so employees aren’t necessarily at risk for seeing their job terminated. The company, he said, did not expect or need all 400 people to leave.
Regarding its recent overall performance, Memphis-based First Horizon reported a $26 million profit in the third quarter and improved profitability in its regional banking and capital markets businesses. Still, the company’s results missed Wall Street’s expectations.