A Webster Bank branch in downtown Boston in 2019. Banker & Tradesman file photo.
Webster Bank could see $15 million in cost savings from its plans to close branches as it takes steps to reduce expenses while growing its business.
The bank announced in December plans to close 27 branches in Massachusetts, Connecticut and Rhode Island, reducing its branch footprint by 17 percent. The closures include 10 of Webster’s 29 Eastern Massachusetts branches.
The branch consolidation is part of a larger initiative to reduce expenses by 8 to 10 percent for annual savings of $18 million, including $15 million resulting from closing the branches, according to Webster’s fourth quarter investor presentation.
During the conference call last week to discuss fourth quarter earnings, Webster Bank’s CEO, president and chairman, John R. Ciulla, said the actions “are transforming our company and the way we do business.”
“We believe that we will continue delivering incremental value to our customers and shareholders for years to come, consistent with our overarching objectives of maximizing economic profits and creating long-term franchise value,” Ciulla said. “Importantly, these actions afford us the capacity to invest in the future and provide better customer experiences through improved products, services and digital offerings, all in the furtherance of our mission to help individuals, families and businesses achieve their financial goals.”
In addition to closing branches, the bank is also looking to reduce corporate office space, Ciulla said, driven in part by the shift in workplace dynamics accelerated by the pandemic.
The bank will further reduce expenses through organizational restructuring, including taking steps to combine internal functions, automate manual processes and outsource some activities. The bank also plans to reduce ancillary expenses, including by redesigning processes and taking a disciplined approach to third-party spending.
In response to an analyst’s question about driving efficiency ratios lower even after the initiatives are completed, Ciulla said the bank could continue to become more efficient, though he added that the moves are designed to grow the business.
“One of the things I want to be clear about is that we’re not about generating shareholder value through cost cutting,” Ciulla said. “What we want to do is make sure that we can continue to drive our differentiated commercial banking business and our HSA business and our community bank business and grow over time.”
Ciulla said to expect the savings to be modest in the first quarter of 2021 and then increase in the second and third quarters following the branch closings, which are expected to be completed by the end of June.
Webster Bank took a $42 million pre-tax charge in the fourth quarter related to the strategic initiatives. The fourth quarter earnings applicable to common shareholders were $57.7 million, or $0.64 per diluted share, compared to $88.1 million, or $0.96 per diluted share, for the fourth quarter of 2019. Earnings per diluted share would have been $0.99 in the fourth quarter without the charge, the bank said in its earnings statement.
For the full year 2020, earnings applicable to common shareholders was $211.5 million, or $2.35 per diluted share, and includes $52.2 million of pre-tax adjustments.
