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Wachovia earnings delight, but cutbacks loom

/ Source: The Associated Press

The financial services giant Wachovia Corp. posted a 32 percent rise in fourth-quarter earnings Wednesday even as it confirmed plans to eliminate up to 4,000 jobs — about 4 percent of its work force — by 2007.

Following a November merger with SouthTrust Corp., the Charlotte-based bank has about 96,000 workers. Company spokeswoman Christy Phillips said about 20 percent of the reductions will be accomplished through attrition, the rest by layoffs.

The job cuts are part of a plan Wachovia executives outlined Wednesday to trim annual expenses by $400 million to $500 million.

Wachovia said fourth-quarter earnings set a record last year, fueled by gains in the general bank and wealth management businesses along with a boost from the SouthTrust merger that closed Nov. 1.

Wachovia's profit was $1.45 billion, or 95 cents per share, for the October-December period, up from $1.1 billion, or 83 cents per share, a year earlier.

Excluding merger-related and other nonrecurring expenses, Wachovia earned $1.5 billion, or 99 cents per share, in the quarter.

Those results beat Wall Street's projection by a penny a share, based on a survey of analysts by the research firm Thomson First Call.

Shares of Wachovia rose 10 cents to $53.08 in morning trading on the New York Stock Exchange. Its shares traded at a 52-week high of $55.01 in December.

On a conference call with analysts, Wachovia chief financial officer Bob Kelly said the bank expects its job cuts to total from 3,500 to 4,000 positions through 2007 as part of a companywide efficiency program.

And chief executive officer Ken Thompson vowed that the company's strong results would not get in the way of ongoing efforts to cut costs.

"We've been working on our efficiency plan for nine months," he told analysts. "We expect to be able to grow revenue and keep our customers and do it efficiently at the same time."

Thompson said his top managers are directly involved in the process.

"This is exactly the right time to do it," he said. "This is not a one-time cost cutting exercise."

Asked about additional acquisitions, Thompson left the door open but declined to elaborate.

"This company has the capability to do all these things and expand through acquisitions if we find one that meets our financial parameters," he said.

In the fourth quarter, revenue climbed 11 percent to $6.16 billion, up from $5.56 billion a year ago.

Wachovia said its general bank produced quarterly segment earnings of $868 million, up 54 percent from the year-ago period.

The wealth management segment's revenue rose 10 percent to $54 million, up 32 percent over the same quarter last year. Net interest income rose 23 percent, the bank said, on average loan growth of 24 percent in consumer and commercial lending.

For the year, Wachovia's net earnings were $5.21 billion, or $3.81 per share, up from $4.26 billion, or $3.18 per share, a year ago.

"With three consecutive years of double-digit earnings growth, Wachovia begins 2005 with good momentum," said Thompson. "All of our four major businesses set earnings and revenue records in 2004."