Though KeyCorp's newest restructuring plan cuts deeper and aims higher than its previous attempts to spark profit growth, it was the company's willingness to look outside for help that led some to believe this time may be different.

The Cleveland banking company said Thursday it would cut 2,300 jobs, or nearly 10% of its work force, during the next 15 months, the largest such cutback plan announced by a major banking company this year. KeyCorp will record $198 million of charges in the third quarter. It is the company's most ambitious plan to improve profitability and, ultimately, is expected to save the company $360 million a year in expenses.

KeyCorp pitched the plan as phase two of a restructuring begun last year. Still, it has struck this chord repeatedly, in 1995 and again in 1996. Each restructuring, analysts said, has yielded little in the way of positive earnings growth.

The failed efforts left most analysts reluctant to extend KeyCorp management any benefit of the doubt, a reality not missed by the company's top executives.

"We certainly understand that some will view [the plan] as just another program similar to the ones that we've undertaken in the past, but this is very much different for us," said K. Brent Somers, executive vice president and chief financial officer. "We are confident that we have the processes in place to ensure the delivery of these results."

What credibility the plan held among Wall Street analysts was mainly attributable to the consultants KeyCorp management brought in, said Thomas McCandless, an analyst at CIBC World Markets.

The consultancy used by Key is EHS Partners, a California firm that is an offshoot of Tandon Capital Associates, the New York firm run by the restructuring maven of the 1990s, Chandrika Tandon. She is associated with much of most aggressive job slashing of that period.

"It's the consultants who came up with a program that's legitimate," Mr. McCandless said. Unlike other restructuring moves this one is comprehensive, not a piecemeal approach, he said.

The company will cut in half the number of its business lines, from 22 units to 11, folding them into more centralized divisions. This means several senior managers probably will lose their jobs. KeyCorp said it will announce management changes over the next six months as it works through its plan.

The company also will begin outsourcing some of its noncore activities. To ensure that the so-called "perform, excel, and grow," or PEG, program bears fruit, the company is changing its incentive compensation package for managers and those who head business units. If objectives are not met, it will mean more meager pay increases for KeyCorp's senior managers.

KeyCorp joins a growing list in the industry - Bank of America Corp., Wachovia Corp., and First Union Corp. - that have recently outlined plans to cut workers as part of a business restructuring.

Analysts have been lukewarm to the industry's latest round of steep cost-cutting, claiming the rush to slash costs often ends up being short-sighted. "It's tough to keep momentum going when you're letting 2,300 people go out the door," said Michael Plodwick, an analyst at UBS Warburg. "I'm not really a big fan of these things because history suggests they don't really work."

But Mr. Plodwick, like other analysts, said he is willing to wait and see.

It is KeyCorp's largest retooling to date. The job cuts are in addition to the 1,975 jobs that Key has already slashed or shed through attrition since announcing the first part of its restructuring last November, executives said during a conference call with analysts.

Even under the new plan, KeyCorp has projected just 6% annual revenue growth for the next two years, though targeting double-digit earnings growth.

The charge is to cover severance packages, an increase in the company's loan-loss reserve, and expenses related to the closure of facilities. The plan is to yield a 43-cent-per-share pretax gain in earnings by 2002, KeyCorp said.

The company said it would bump up its loan-loss reserves by $30 million, to more than $1 billion. KeyCorp said it does not expect any change in the pace of net chargeoffs for the third quarter.

The company will also repurchase 25 million of its shares in an unspecified time frame.

If a lot of the cost-cutting efforts sound familiar, they should.

In November 1996, Key said it would eliminate 2,700 jobs by consolidating its 12 bank charters into one. It also sold 280 branches. In April 1995 the company had said it would reposition its businesses, divesting itself of a $25 billion mortgage servicing business and 24 branches.

Those efforts, however, have not brought the rewards KeyCorp executives hoped for.

"It is a positive announcement today, but you have to keep in mind it's in response to lagging earnings and revenue growth," said Joseph Duwan, an analyst at Keefe, Bruyette & Woods Inc. "I think there is a fair amount of a "show me" attitude on the Street because of [Key's] past restructurings and less-than-stellar earnings performance."

He said the company should be given credit for dealing with its problems head-on and also for doing it more aggressively this time.

Layoff Wave Builds
Bank staffing cutbacks have grown in percentage this year
Bank/Job Cuts Percentage of Workforce Announced
KeyCorp: 2,300 9.4% September 21
Wachovia: 1,800 8.5% August 28
First Union: 5,300 7.0% August 11
Bank of America: 10,000 6.7% July 28
FleetBoston: 4,000 5.6% April 7
Bank One: 5,100 5.5% March 20
Source: Company reports, SEC filings.

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