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Wachovia to cut 1,800 jobs
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August 28, 2000: 2:20 p.m. ET
N.C. bank to cut 8.5% of work force to reduce costs, boost earnings
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NEW YORK (CNNfn) - Wachovia Corp., the fourth-largest bank in the southeastern United States, announced Monday that it will lay off 1,800 people, or 8.5 percent of its work force, to reduce costs and lift its sagging earnings.
The job cuts will reduce the regional bank's annual expenses by $100 million and should boost its pretax earnings by $425 million by 2002, the company said. Wachovia will take a pretax charge of $80 million to $100 million, mostly to pay severance costs and career transition benefits to employees.
Wachovia's announcement follows a warning earlier this year that rising interest rates would hurt its bottom line. On June 15, the Winston-Salem, N.C.-based bank told investors that rising rates, which the Federal Reserve has increased six times since June 1999, would cut into its profit margins.
At that time, Wachovia also said it planned to take a $200 million provision to protect against the possibility of bad loans, which would cut its earnings by 64 cents a share. The bank went on to report a 43 percent drop in second-quarter operating profit, though it managed to beat Wall Street's lowered earnings forecasts.
The bank posted operating earnings of $143.3 million, or 70 cents a diluted share, down from $253.1 million, or $1.22, in the year-earlier quarter.
 It also increased its loan loss provision to $273.4 million from $74.5 million, saying slower economic growth was making it more difficult for customers to keep up loan payments. The U.S. economy expanded at a 5.3 percent pace in the second quarter, slightly above the 4.8-percent pace recorded in the first quarter.
"The resource realignment announced today is another step in a thoughtful process that will make Wachovia stronger and more competitive," L. M. Baker Jr., Wachovia's chairman and chief executive, said in a statement. "We must continue to take decisive actions, even when those are difficult."
A "substantial portion" of the charge will be taken in the third quarter, Wachovia said.
Wall Street analysts have warned investors in recent months that regional banks whose lending is more tied to individual customers and small- to mid-sized businesses will likely feel the effects of rising interest rates more than national banks who are bigger in size and scope.
In June, Goldman Sachs (GS: Research, Estimates) lowered its 2000 earnings estimate on Wachovia to $4.65 a share from $5.45 and cut its 2001 view to $5.60 a share from $6.00. Donaldson Lufkin & Jenrette (DLJ: Research, Estimates) also cut Wachovia's 2000 estimate to $5.30 a share from $5.50 a share, and reduced its 2001 estimate to $5.70 a share from $6.00.
Wachovia holds about $71 billion in assets and operates through 700 branches in Georgia, North Carolina, South Carolina and Virginia. It currently employs about 21,300 people.
Wachovia (WB: Research, Estimates) shares gained 0.56 to 57.56 in midday trading. 
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Wachovia
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