Battling to stay independent, St. Paul Bancorp said Tuesday it would take a charge of $19 million to $23 million against third-quarter earnings to help reduce annual costs $9 million by 1999.

Joseph C. Scully, chief executive officer of the $5.3 billion-asset thrift, said the cost-cutting campaign was one of a series of initiatives to bolster St. Paul's return on equity to 15%, from 11.49%, within two years. He said the company also was focusing on capital management and asset growth to improve returns.

Investors were skeptical that the plan would meet those objectives, and some, noting recent shareholder pressure on the board to sell, predicted the thrift would ultimately fall prey to consolidation.

"It's too little too late," said Thomas O'Donnell, an analyst with Salomon Smith Barney. "I see another spate of acquisitions before the end of the year, and I'd say the odds are pretty high St. Paul will be part of it."

St. Paul's shares gained only 37.5 cents, to $23.375, in a strong market Tuesday.

In an interview, the chief executive said the cost-paring program-which entails early retirement offers to 180 employees, modifying the retirement plan, terminating an employee stock ownership plan and suspending a bonus program for officers and senior executives-has been planned since early this year. He insisted it was not brought on by recent investor pressure.

The largest portions of the charge would be related to the retirement program and elimination of the employee stock plan. The company expects half of the 180 who are offered early retirement to take it. St.Paul has 1,600 employees.

St. Paul said the charge would include $5 million to upgrade computer systems. The new charge is in addition to a previously announced third- quarter pretax charge of $11.5 million related to the July acquisition of Beverly Bancorp. of Chicago.

Some investors have argued that the thrift, with 65 Chicago offices, is worth more to shareholders in a sale than as an ongoing concern, but Mr. Scully has stood in the way of seeking a buyer.

Mr. Scully said he was running the company in the best interest of shareholders. "We have no stance on independence," he said. "We're managing the company for the long run."

Joseph Stieven, an analyst with Stifel, Nicolaus & Co., St. Louis, said his analysis indicated the company could not get to 15% return on equity with the new plan.

John O'Connor, director of investment research at Fort Washington Investment Advisors Inc., Cincinnati, said the cost plan was "overdue." He attributed it to recent pressure placed on St. Paul by investors. "I think management is being reactive rather than proactive," Mr. O'Connor said.

One investor, New York money manager Harry V. Keefe, has demanded better performance and is considering running two director candidates for the St. Paul board next spring. Mr. Scully declined to discuss Mr. Keefe.

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