First Interstate relocates 400 data processing jobs from downtown Los Angeles elsewhere.

First Interstate relocates 400 data processing jobs from downtown Los Angeles elsewhere

First Interstate Bancorp will move a data processing unit employing 400 people in downtown Los Angeles to Arizona and Oregon, a First Interstate official told the Business Journal, following two of California's other "Big Four" banks which have recently moved credit card operations out of state.

The move represents the "first major consolidation" of what may be more as the Los Angeles-based bank implements a new cost-cutting philosophy, said John Popovich, First Interstate spokesman. Altogether 600 employees of the information services sector of the data processing departments in Los Angeles and Fremont, Calif. will be moved to Portland, Ore. and Tempe, Ariz.

Last month, Bank of America announced its Pasadena-based credit card operation, which employs about 1,500 people, would move to Tempe, a Phoenix suburb. Last year, Security Pacific moved its credit card operation from California to Phoenix.

Popovich said there are no current plans to move First Interstate's credit card operation, which employs 900 people in Simi Valley, out of state. Bank officials are not even considering moving the credit card operation, said First Interstate spokeswoman Cheryl Friedling.

However, the company, which operates banks in 25 states, is "analyzing" possible consolidation of other data processing functions into regional centers, Popovich said.

"We want to eliminate duplication of services. We're really just beginning the implementation of this philosophy," Popovich said. "There is just as much chance these things will be consolidated in California as there is they'll be consolidated out of state."

Banks, like aerospace firms and other industries, have been making moves out of California, lured by cheaper land and labor costs in other states, banking industry experts say.

Data processing and other operations that are not directly tied to bank customers are the operations targeted for possible moves, said Gerry Findley, a Brea-based banking consultant. "They can have the same quality of staff at 25 percent of the cost. They have a hell of an incentive to do it. It's called bucks."

Campbell Chaney, banking analyst for Sutro & Co., a San Francisco-based investment firm, noted there are real estate deals available in Arizona because of the collapse of the real estate market there. "They have all this real estate they built during the high times," he said. "The buildings now aren't occupied."

Popovich said First Interstate wanted to consolidate in Portland and Tempe partly because First Interstate already had core data processing units there to build on. Labor costs were not "the primary reason" for the move, he said, noting that many of the information services employees would be offered jobs in Portland and Tempe.

Popovich said that it was not yet known how many of the information services division's 600 employees would be terminated and how many would be offered jobs in Portland and Tempe. "Almost everyone I know in a position of responsibility was offered a job there," he said.

Some employees have taken trips to Tempe and Portland to research the areas before making a decision on whether to move, Popovich said. It is not known how many jobs will be created in the new locations.

First Interstate Executive Vice President Webb Edwards, general manager of information services, told employees of the information services section located in the bank's processing center about the consolidation plan in January, Popovich said. Information services is a "sophisticated" data processing unit, he said.

Although not involved in the First Interstate decision, the Greater Phoenix Economic Council has wooed and won two other divisions of large California banks to the Phoenix metropolitan area, said Jeff Burt, vice president of corporate accounts for the council. The relocation and consolidation of Bank of America's and Security Pacific's credit card centers in the Phoenix area is part of the council's stategy to make the city a national financial services hub, Burt said.

The New York-based Chase Manhattan Corp. has also moved some of its operations to the Phoenix area, Burt said.

In addition, a number of site relocation firms, representing about "half a dozen" financial institutions, have been in contact with the council about possible moves of credit card and other data processing operations. The relocation firms have kept the identities of financial institutions they are working with secret, he added.

The council is not specifically targeting California banks and it is just a coincidence that two of the three major banks moving operations to Arizona were California banks, Burt said.

"We tend to have a labor force that is conducive to the industry," Burt said. "We have a young labor force. It is cheaper than many California markets, that is correct."

Popovich said the law was not a consideration for First Interstate to move its operation to Arizona, since there are no rate limits under California law.

Security Pacific opened its credit card operation in Tempe about a year ago, employing about 600 Arizona residents, Burt said. The council hopes that Bank of America's move to Phoenix will create 800 to 1,200 new jobs for Arizonas, he said.

Meanwhile, Pasadena city officials are talking with Bank of America officials about the bank transferring other operations to the vacated credit card center to offset the 1,700-employee job loss in the city, said William C. Reynolds, director of housing and development for the City of Pasadena.

The talks with Bank of America also involve possible zoning changes for real estate the bank owns in Pasadena, Reynolds added. "They have one block on Colorado Boulevard in the middle of downtown that is critical to the development of the retail area," Reynolds said.

City officials were concerned about the move, although the credit card center was not a sales tax producer for the city treasury, Reynolds said. City officials are also not concerned that the credit card building could find a new tenant, Reynolds said, noting that Pasadena has a high office occupancy rate.

"The bank has been an important employer in Pasadena for years and years," Reynolds said. "They are the city's principal depository of all our funds. We would like the bank to remain a strong employer in Pasedena."

PHOTO : Bank of America: Operation relocates