Hancock Holding in Gulfport, Miss., has raised the ire of analysts and investors in an unusual way — by unveiling a plan to cut costs over the next two years.

Hancock, which doubled in size in 2011 by acquiring Whitney Holding in New Orleans, disclosed late Thursday that it will cut annual expenses by $50 million. The $20 billion-asset company could also exit some business lines in certain markets.

Cost-cutting efforts usually play well to investors. But in this case, analysts say management missed an opportunity to get more aggressive after it bought Whitney.

"This is not an issue that just happened yesterday," says Chris Marinac, an analyst at FIG Partners who cut his stock rating for Hancock to "underperform" based on the disclosure. "There are deeper cost cuts that could have been taken. The marketplace has lost confidence in management."

Hancock, when it announced the Whitney acquisition in late 2010, vowed to cut annual expenses by $134 million as part of the $1.5 billion deal.

Hancock was "able to wring out all the cost saves with the consolidation of back offices" from that deal, Carl Chaney, the company's president and co-CEO, said during a Friday conference call. The new cost-cutting effort acknowledges that Hancock "can no longer operate under the model of being all things to all people."

The new cuts will include "process improvement" and increased use of technology, Michael Achary, the company's chief financial officer, said during the conference call. Hancock will also assess the products and services it offers in specific markets.

"Some markets are more commercially focused, and not retail, or vice versa," Chaney said without providing specifics. "Some operate as both."

In the aggregate, all of Hancock's business lines are profitable, Achary said. But there are instances where business lines are "not accretive" in certain markets, he added.

Hancock is the largest bank, by deposit market share, around Gulfport, and it is the second-biggest bank in New Orleans, according to June 2012 data from the Federal Deposit Insurance Corp.

Analysts hit Chaney with cost-cutting questions during Friday's call to discuss first-quarter earnings. Hancock made $48.6 million, but it earned 4 cents a share less than the 60 cents forecast by analysts polled by Bloomberg.

"Here's your chance to cut business lines or take more drastic action," Ken Zerbe, an analyst at Morgan Stanley, said. "Are you missing an opportunity to be much more aggressive?"

"We don't see any specific line of business that it makes strategic sense to completely exit," Chaney responded.

Analysts were particularly put off by Chaney's claims that Hancock had cut all it could from the Whitney deal. Management is treating the purchase of the $11.5 billion-asset Whitney "like it was a small branch acquisition …and that's where I disagree," Marinac says. "Politically, it's a challenge when a company in Mississippi buys a bank in New Orleans. You have to be willing to do the right thing."

Hancock still operates Whitney as a separate bank. Emlen Harmon, an analyst at Jefferies, asked Chaney about the potential of merging the banks.

"Both brands enjoy incredible good will," Chaney said. Dropping the Whitney name "doesn't create any opportunities [and there are] no real cost saves with a consolidation of that name at all."

As part of the new cost-cutting effort, Hancock said it will review "front and back office" operations. An unspecified number of job cuts are expected; Hancock said it would incur near-term costs tied to severance pay.

Hancock's efficiency ratio was 64% on March 31. Once the cost-cutting program is completed, the ratio would fall between 57% and 59% by 2016. Marinac says the figure could go even lower because of the potential for higher revenue if the Federal Reserve Board raises interest rates.

"That sounds great, but what does 57% mean four years from now when we have a higher-rate environment?" Marinac says. An efficiency ratio closer to 50% "feels right …for a well-oiled banking machine."

Chaney blamed part of Hancock's struggles on the ongoing low interest rate environment. "We all thought that, at this point in time, the economy would be providing us some relief …that interest rates would be higher than they are today," he said.

"When you look at our balance sheet, we benefit significantly from a rising interest rate environment, especially when you look at the significant amount of noninterest deposits we have," Chaney added.

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