Bank CEO warns of job cuts if interest rates don't move
U.S. Bancorp's (USB) leader has warned that his company might consider cutting staff if interest rates don't begin to rise later this year, as federal officials have indicated.
Chairman and CEO Richard Davis told guests at a conference that engaged and happy employees are a key to making the company perform well and ultimately return value to shareholders. He said he believes the economy is in the "very last inning" before interest rates move and, if he is right, a decision to not make any cuts from the bank's employee base makes sense.
"If we're wrong, and rates actually aren't going to move up, and they are fundamental to our long-term course, trust me, we will cut expenses," he said Thursday at the conference.
The bank, with about 67,000 employees, operates more than 3,100 branches in 25 states.
The Federal Reserve has kept its key benchmark rate at a record low near zero since December 2008.
Low interest rates affect a key profitability measure for banks: Net interest margin, which is the difference between the income they receive from loans and the interest they pay depositors and other lenders.
Federal Reserve Chair Janet Yellen said earlier this month that she expects to begin raising interest rates later this year if the job market improves and the Fed is confident inflation will climb closer toward its target rate. She added that the central bank will proceed cautiously when it finally beings to raise rates.
Many economists now predict the Fed will wait until at least September.
Shares of Minneapolis-based U.S. Bancorp slipped 26 cents to $43.44 in Friday afternoon trading as broader indexes also fell slightly.