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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of the Report: March 25, 1996 Commission file number 1-5805
CHEMICAL BANKING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2624428
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
270 Park Avenue, New York, New York 10017-2070
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 270-6000
Items 5. Other Events
Chemical Banking Corporation ("Chemical") announced on March 19,
1996 that its Board of Directors had declared a quarterly dividend
on its common stock of $.56 per share, an increase from the
previous quarter's dividend of $.50 per share. The dividend will
be payable on April 30, 1996 to holders of record at the close of
business on April 4, 1996. A copy of the press release relating to
the dividend announcement is attached as an exhibit hereto.
Chemical and The Chase Manhattan Corporation ("Chase") announced on
March 21, 1996 their revised estimates of merger-related costs and
anticipated savings as well as their financial targets for the
"new" Chase Manhattan Corporation following the merger on March 31,
1996.
The two companies announced that they now anticipated annual
savings from their merger to be $1.7 billion, $200 million greater
than previously estimated. This increase results from higher than
expected salary, real estate and technology and systems integration
savings.
The companies also said that they expected 30 percent of the
savings to be realized by the end of 1996, 70 percent by year-end
1997 and the total by the end of 1998. These annual expense
reductions are expected to be realized without any job eliminations
beyond those announced in August 1995.
Also announced were one-time costs related to the merger of $1.9
billion, an increase of $400 million from earlier estimates. These
increased costs are associated with severance, facilities
consolidations, disposal of equipment and systems integration, as
well as the elimination of certain operations. Of that figure,
$1.65 billion, or approximately $1.0 billion on an after-tax basis,
will be taken as a charge in the first quarter of 1996, with the
remaining $250 million of expenses to be substantially incurred
over the two years following the merger.
The companies also confirmed longer-term financial targets for the
new Chase of double-digit operating earnings per share growth in
each of the three years through 1998, and a core efficiency ratio
in the low 50 percent range and a return on average common
shareholders' equity of 18 percent or higher by the end of 1998.
The companies also for the first time announced their 1996
operating goals for the merged institution:
o Earnings per share growth in excess of 15 percent
o Efficiency ratio in the high 50 percent range
o Operating revenue growth of 5-7 percent
o Non-interest expenses of approximately $9.1 billion
o Return on common shareholders' equity of 17 percent
The companies also announced that they expected that first quarter
1996 operating earnings to exceed analysts' consensus estimate of
$1.61 per share. In addition to the merger-related restructuring
charge noted above, they announced a number of special items to be
recognized in the first quarter. These items include a charge of
$100 million against new Chase's reserve for credit losses, as a
result of conforming charge-off policies with respect to credit
card receivables; the loss of $60 million ($37 million after-tax)
on the sale of a building in Japan; a charge of $40 million ($25
million after-tax) related to the conforming of pension
liabilities; and anticipated aggregate tax benefits and refunds of
$150 million.
The managements of the companies also emphasized that their target
of overall revenue growth of 5-7% for 1996 was on an "operating"
basis (that is, on a basis that excludes special one-time items and
the impact of securitizations), rather than on a "reported" basis
and that such target was based on their expectation that the
Corporation's net interest income would increase by approximately
3-4% in 1996 (excluding the impact of securitizations undertaken
during the year) and that the Corporation's non-interest revenue
would increase by more than 7% over the 1995 amount. With respect
to credit quality, management indicated that it believes the
quality of the Corporation's commercial and industrial loan
portfolio will remain relatively stable in 1996 (although it did
not expect commercial loan recoveries to equal 1995 levels), but
that the Corporation's credit card net charge-offs as a percentage
of average credit card receivables outstanding were expected to
approximate 4.5% during 1996 (as compared with approximately 4.0%
in 1995). A higher level of credit card net charge-offs is
expected as a result of the 25% growth in outstandings experienced
during 1995 and anticipated further growth in outstandings of 15-
20% in 1996, and from anticipated higher levels of delinquencies
and personal bankruptcies.
Finally, as part of the Corporation's commitment to a disciplined
capital policy, management of the new Chase indicated that it: had
targeted a Tier 1 capital ratio for the Corporation of 8-8.25%;
would divest or take other appropriate action to address any
businesses determined by the Corporation to be underperforming;
would return excess capital to shareholders; would, for the 180
days following consummation of the merger, repurchase shares of
common stock of the Corporation only for employee benefit plan
purposes and in accordance with the pooling-of-interests accounting
rules; and expected that, following the merger, the dividend
practice of the Corporation would be to pay a common stock dividend
equal to approximately 25-35% of the Corporation's net income less
preferred dividends. Future dividend policies of the Corporation
following the merger will be determined by the Board of Directors
in light of the earnings and financial condition of the Corporation
and its subsidiaries and other factors, including applicable
governmental regulations and policies.
A copy of the corporations' joint press release is attached as an
exhibit hereto. That press release and this Current Report on Form
8-K contain statements that are forward-looking within the meaning
of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to risks and uncertainties, and the
Corporation's actual results following the merger may differ
materially from those set forth in such forward-looking statements.
Factors that might cause such a difference include, but are not
limited, to the following:
Because of the inherent uncertainties associated with merging two
large companies, there can be no assurance that the Corporation
will be able to realize fully the cost savings it currently expects
to realize as a result of the merger, or that such savings will be
realized at the times currently anticipated. Currently unforseen
changes in real estate markets or personnel requirements, if they
occur, could affect the timing and magnitude of the anticipated
savings. Further, the technology integration and systems
conversions to be undertaken in connection with the merger include
67 major suites of systems and over 1,500 underlying individual
applications. Each suite will be processing volumes at much higher
levels than previously and operating feeds to the selected suites
have had to be adapted to conform to processing requirements.
Since these activities are highly complex and technologically
sophisticated, currently unanticipated problems, if they occur,
could delay the implementation timing or cost more than
anticipated.
The Corporation's revenue growth outlook assumes retention of major
clients of Chase and Chemical with minimal merger-related revenue
loss. However, the Corporation operates in a highly competitive
environment, which is expected to become increasingly competitive,
and there is no assurance that current customers of Chemical and
Chase will continue to do the same level of business with the new
Corporation following the merger.
Furthermore, the Corporation has identified its global markets,
global services, investment banking, private banking and national
consumer business as businesses that it believes will be primarily
responsible for providing the anticipated revenue growth of the
Corporation. However, there is no assurance that such businesses
will experience revenue growth at the rates currently anticipated.
The profitability of these businesses, as well as the Corporation's
credit quality, could be adversely affected by a worsening of
general economic conditions, particularly by a higher domestic
interest rate environment, as well as by foreign and domestic
trading market conditions. An economic downturn or significantly
higher interest rates could increase the risk that a greater number
of the Corporation's customers would become delinquent on their
loans or other obligations to the Corporation, or would refrain
from securing additional debt. In addition, a higher level of
domestic interest rates could affect the amount of assets under
management by the Corporation (for example, by affecting the flows
of moneys to or from the mutual funds managed by the Corporation),
impact the willingness of financial investors to participate in
loan syndications and underwritings managed by the Corporation's
corporate finance business, adversely impact the Corporation's loan
and deposit spreads and affect its domestic trading revenues.
Revenues from foreign trading markets may also be subject to
negative fluctuations as a result of the impact of unfavorable
political and diplomatic developments, social instability and
changes in the policies of central banks or foreign governments,
and the impact of these fluctuations could be accentuated by the
volatility and lack of relative liquidity in some of these foreign
trading markets.
Additional factors that could affect the prospects of the
Corporation's businesses, including actions that might be taken by
its banking regulators or the results of pending legislation or
judicial decisions, are further discussed in Chemical's Annual
Report on Form 10-K for the year ended December 31, 1995.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
The following exhibits are filed with this Report:
Exhibit Number Description
99.1 Press Release dated March 19, 1996
99.2 Press Release dated March 21, 1996
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
CHEMICAL BANKING CORPORATION
(Registrant)
Dated: March 22, 1996 By /s/John B. Wynne
John B. Wynne
Secretary
EXHIBIT INDEX
Exhibit Number Description
99.1 Press Release dated March 19, 1996
99.2 Press Release dated March 21, 1996
Press Contact: Kathleen Baum
212-270-5089
Investor Contact: John Borden
212-270-7318
For Immediate Release
Tuesday, March 19, 1996
CHEMICAL RAISES DIVIDEND
New York, March 19, 1996 -- The Board of Directors of
Chemical Banking Corporation today increased the quarterly
dividend on the outstanding shares of the corporations common
stock to $.56 per share, up 12 percent from $.50 per share,
payable April 30, 1996, to stockholders of record at the close
of business on April 4, 1996. On an annual basis, this would
represent an increase in the dividend rate to $2.24 per share
from $2.00 per share.
Because the record date will occur after the merger of
Chemical Banking Corporation and The Chase Manhattan Corporation
on March 31, 1996, all stockholders on the record date, whether
they are former Chase or former Chemical stockholders, will be
entitled to receive the announced dividend.
# # #
For Immediate Release
March 21, 1996 Press Contact: Kathleen Baum
212-270-5089
John Stefans
(212) 270-7438
Investor Contact: John Borden
212-270-7318
Chemical and Chase Raise Estimates of Annual Expense Savings
and One-Time Costs of Their Merger
New York, March 21, 1996 -- Chemical Banking Corporation
and The Chase Manhattan Corporation today announced they have
raised their estimates of annual expense savings and one-time
costs, increasing the value of their merger. They said they now
anticipate annual savings to be $1.7 billion, $200 million
greater than previously estimated. The increase results from
higher than expected salary, real estate and technology and
systems integration savings.
The companies said they expect 30 percent of the savings to
be realized by the end of 1996, 70 percent by year-end 1997 and
the total by the end of 1998. These annual expense reductions
are expected to be realized without any job eliminations beyond
those announced in August 1995.
Also announced were one-time costs related to the merger of
$1.9 billion, an increase of $400 million from earlier
estimates. These increased costs are associated with severance,
facilities consolidations, disposal of equipment and systems
integration, as well as the elimination of certain operations.
Of that figure, $1.65 billion, or approximately $1.0 billion on
an after-tax basis, will be taken as a charge in the first
quarter of 1996, with the remaining $250 million of expenses to
be substantially incurred over the two years following the
merger.
The companies also confirmed longer-term financial targets
for the new Chase of double-digit operating earnings per share
growth in each of the three years through 1998, and a core
efficiency ratio in the low 50 percent range and a return on
average common shareholders' equity of 18 percent or better by
the end of 1998.
The companies also for the first time announced their 1996
operating goals for the merged institution:
o Earnings per share growth in excess of 15 percent
o Efficiency ratio in the high 50 percent range
o Operating revenue growth of 5-7 percent
o Non-interest expenses of approximately $9.1 billion
o Return on common shareholders' equity of 17 percent
The companies also announced that they expected first
quarter 1996 operating earnings to exceed the analysts'
consensus estimate of $1.61 per share. In addition to the
merger-related restructuring charge noted above, they announced
a number of special items to be recognized in the first quarter.
These items include a charge of $100 million against new
Chase's reserve for credit losses, as a result of conforming
charge-off policies with respect to credit card receivables; the
loss of $60 million ($27 million after-tax) on the sale of a
building in Japan; a charge of $40 million ($25 million after-
tax) related to the conforming of pension liabilities; and
anticipated aggregate tax benefits and refunds of $150 million.
# # #
The forward-looking statements contained in this release are
subject to risks and uncertainties. The Corporation's actual
results following the merger may differ materially from those
set forth in such forward-looking statements. Reference is made
to the Corporation's reports filed with the Securities and
Exchange Commission for a discussion of factors that may cause
such differences to occur.