(June 27) – “First Union Corp. detailed a massive restructuring plan that includes a $2.8 billion charge and, as expected, the shuttering of consumer-finance company Money Store Inc., which the banking company bought just two years ago,” writes Carrick Mollenkamp in today’s Wall Street Journal.
“First Union’s new chief executive, G. Kennedy Thompson, in his first presentation to Wall Street since assuming the CEO duties in April, outlined plans for First Union to shed ailing operations and to refocus on three core businesses: retail banking, investment banking and retail stock-brokerage and asset management.”
“He said that based on a six-month review of operations, those three businesses are targeted to post earnings growth of 10% to 12% annually once the restructuring is complete.”
“Despite revealing the long-awaited plans to turn around the Charlotte, N.C., bank’s financial performance, analysts and investors remained unconvinced that First Union has fixed its credit and earnings problems. Several analysts cut their estimates for First Union’s earnings in 2000 and 2001.”
“In 4 p.m. composite trading on the New York Stock Exchange Monday, shares of First Union rose 6.25 cents to $27.875.”
“‘Ken did exactly what he needed to in presenting a credible face on First Union for the first time in three years,’ said money manager Harold Schroeder at Carlson Capital, Dallas. But Mr. Schroeder and other analysts said that after lowering earnings estimates three times in 1999 and guiding down estimates for this year and next, First Union is out of chances after Monday’s announcement.”
“Mr. Thompson acknowledged that the bank must do more to win back Wall Street. ‘We have done a very thorough housecleaning,’ Mr. Thompson said. ‘We don’t expect any further restructuring events in the future.'”
“First Union plans to record a charge totaling $2.8 billion, the bulk of which will be taken in the second quarter. The remainder will be divided between the third and fourth quarters, and possibly the first quarter of next year.”