Beneficial Bancorp, the largest bank still based in Philadelphia, told investors Friday that it would cut its payroll costs by about 11 percent this spring by laying off 44 of its higher-paid workers.
"It is painful. It is the worst," chief executive Gerry Cuddy said in an interview. Beneficial has not reduced head count in several years, he said, "unlike the big banks that do this each quarter."
Beneficial, with nearly $5 billion in loans and other assets and 55 branches, remained profitable and boosted loans 3 percent in the last three months, it told investors in its quarterly report Friday.
But as a newly public company - it had been owned since the mid-1800s by depositors before converting, in stages, to stock ownership - Beneficial feels a new impetus to keep a lid on costs, Cuddy said.
The bank can't keep waiting for the Federal Reserve to boost interest rates, which would relieve pressure on depressed profit margins, he said.
Bank officials now think substantial rate hikes will not happen until after the presidential election. Meanwhile, "we have to look at our expenses," Cuddy added.
Investors cheered the cuts by boosting Beneficial shares in trading Friday. The stock closed at $13.96, up $0.13 or 0.94 percent.
At the end of 2015, Beneficial employed 766 at its 1818 Market St. headquarters and at branches in the city and the Pennsylvania and New Jersey suburbs. Cuddy said the company had cut mostly "senior people" earning more than the bank's median pay. The cuts are taking place as Beneficial finishes its $105 million acquisition of Conestoga Bank.
Now that it's public, Beneficial itself is listed by bank analysts as a potential takeover target. But Cuddy said, "Our strategy is unchanged: We're going to grow organically and look for M&A opportunities like Conestoga."
The industry is consolidating. BB&T Corp. of North Carolina last year agreed to buy National Penn Bank and Susquehanna Bancshares, two of the largest independent banks remaining in Southeastern Pennsylvania. Souderton-based Univest Corp. last year agreed to buy Fox Chase Bank, and Philadelphia's East River Bank last month agreed to be acquired by Downingtown-based DNB.
Banks with assets under $2 billion say they have a tough time breaking even. Farther up the scale, Customers Bank of Wyomissing, Pa., says it is trying to keep assets under $10 billion, to avoid the extra layer of capital requirements federal regulators impose on larger banks.
Instead of making more loans or buying more banks, Beneficial spent $80 million in the last three months buying back shares to prop up its price, analyst Frank Schiraldi noted in a report to clients at Sandler O'Neill & Partners in New York.