U.S. Bank has put a hold on new full-time hires and nonessential travel, and has even cut salaries in one group, as the lender addresses an industrywide slowdown in revenue.
The Minneapolis-based bank is coming off a weak first quarter, and Chief Executive Richard Davis told analysts at an investors conference this week that it is countering the revenue declines with cost controls until further notice.
“We don’t want to overhire and then find out six months from now that the world didn’t evolve like we hoped and we have to let another couple thousand go,” Davis said on Wednesday in New York.
The hold on new full-time hires started in mid-February, he said. The bank continues to replace employees who leave.
Spokeswoman Nicole Garrison-Sprenger said via e-mail that the company is simply being prudent as it works to grow revenues faster than expenses in a slow-growth economy. The bank remains “hopeful that activity will pick up later in the year,” she said.
The trims include limiting nonessential travel, renegotiating vendor contracts, working with business lines to reprioritize projects and holding bankwide staffing to current levels, Garrison-Sprenger said.
“Each group in the bank was permitted to develop a unique manner in which to manage their expense line. And in the case of our technology and operations group, they chose to institute a salary reduction for all salaried employees in the division,” Garrison-Sprenger said. “Those employees may take an additional week away [without pay] sometime during the year.”
She said the company will return to “original expense levels” as the economy improves.
Like other banks, U.S. Bank’s profits have suffered from weak demand for new loans and a falloff in mortgage refinancing that occurred after a rise in interest rates. The bank’s revenue has dropped, on a year-over-year basis, for five straight quarters.
Industrywide bank profits fell nearly 8 percent in the first quarter from a year ago, the Federal Deposit Insurance Corp. said Wednesday. It’s only the second time in more than four years that has happened. Much of the drop was due to the steep decline in mortgage business and slowdown in financial trading.
Dick Bove, a veteran bank analyst with Rafferty Capital Markets, said all banks are in trim mode and that the current quarter isn’t going to be robust either.
Still, he called the extent of U.S. Bank’s controls “a little bit shocking.”
“I don’t ever recall any asking any employees to take a week of unpaid leave,” Bove said. The cuts seemed a bit “draconian,” he said, adding that Davis is known for running an efficient operation.
“He’s in my view one of the best, if not the best, regional bank manager in the United States,” Bove said.