On Wednesday, Marshall & Ilsley Corporation (MI) announced that it is in the process to cut 143 positions across the country, including 21 in St. Louis, 16 in Kansas City, 12 in Arizona, and 20 in Minnesota. This represents about 1.6% of the total work force of the company.

The target employees include internal support and managerial staff. M&I notified all the employees about the lay off on February 22. The company stated that the affected employees will be given severance packages and even outplacement services will be provided to them.

M&I also commented that the current workforce reduction is due to internal evaluation and realignment. This has nothing to do with its impending acquisition by Toronto-based Bank of Montreal (BMO). In December 2010, the company had announced a stock-for-stock merger deal valued at $4.1 billion with BMO. Under the terms of the deal, M&I’s shareholders will receive 0.1257 share of BMO for each share of the company. The agreement is expected to be closed by July 31, 2011.

This is not the first time that M&I had laid off its staff. In 2009, the company slashed its work force by 8% or 830 jobs. The company had to take this action to deal with economic downturn.

With M&I reporting losses since the last several quarters, we believe that the present job cuts will enable the company to reduce expenses, alleviating bottom-line pressure.

Though M&I’s management has been able to meet most of the challenges – a lack of core deposit growth and the ongoing interest rate volatility – with the help of low cost funding, disciplined deposit pricing and the preservation of its strong capital base, but pressure on core revenues and higher credit costs will weigh high on the upcoming results.

M&I currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, in the absence of any significant positive or negative catalyst, we maintain a long-term “Neutral” recommendation on the shares.

 
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