NationsBank chairman declares a $100 million war on waste.

Hugh L. McColl Jr. has issued an aggressive challenge to his NationsBank Corp. employees: cut $100 million out of nonpersonnel operating expenses by yearend.

With no mention of "or else."

The NationsBank chairman and chief executive issued his challenge in the bank's biweekly internal newsletter, where he colloquially complains about "some things that have been bugging me." What irritates Mr. McColl is "money we're throwing out the window" on nonessential expenses.

In the newsletter, Mr. McColl runs through a laundry list of items on which he thinks Charlotte-based NationsBank is overspending: $19 million a year for long distance calls; $67 million for supplies, including $3 million for copier and printer paper; and $9 million on overnight mail.

Phone-Call Finance

Mr. McColl calculates, for example, that cutting eight seconds off each long distance call would save the company $1 million a year. "I don't think people think about that," he complains. "They ramble along on the phone. That's real money going out the door. We spend a fortune on conference calls in which people sort of mill around on the phone."

Mr. McColl's lament could be echoed by virtually any large corporation today. But his renewed interest in cost-cutting parallels an industry-wide trend. Just a few months ago, Providence, R.I.-based Fleet Financial Group Inc. announced a sweeping efficiency drive aimed at cutting overhead expense by $300 million a year. Other banks have initiated similar but lower profile efforts.

In the case of NationsBank, Mr. McColl has informed his 800 senior managers across the company that their expenses in foru majoy categories (travel, overnight mail, supplies and telecommunications) will be tracked each month. Mr. McColl is personally contacting the CEOs of NationsBank's 50 largest supply vendors to ask for a 10% price reduction, "with equal or better service."

Reducing Overhead Ratio

Mr. McColl says his current war on expenses is aimed at reducing NationsBank's expense-to-revenue ratio from its current level of 61.3% to "a point below 60%, and do it sensibly and quickly" in order to improve the company's standing on Wall Street.

NationBank's ability to manage exenses has long provoked skepticism among securities analysts, particularly after the company accelerated its acquisition program in 1988. It was only in last year's third quarter that NationsBank began showing some progress in reducing its overhead ratio, which fell to 62.3% from 63.2%.

Thumbs Up from Analysts

Analysts applauded the renewed effort Tuesday, noting that Mr. McColl issued his challenge to NationsBank employees before publicizing the projected $100 million in savings to investors.

"It means he doesn't want to raise the expectations before he has something to talk about," says Moshe Orenbuch, with Sanford C. Bernstein in New York.

Mr. Orenbuch calculates that cutting NationsBank's $5 billion annual expense base by $100 million could add 20 cents a share to earnings. "It is a big number. It will have a noticeable benefit," Mr. Orenbuch said.

Mr. McColl was on vacation Tuesday and could not be reached for comment, but a bank spokesman confirmed the $100 million target.

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