Investor reaction was muted Friday after First Union Corp.'s dramatic disclosure that it might cut up to 10% of its work force.

Shares which had risen $1 in anticipation of First Union's meeting with analysts Thursday evening dropped 25 cents in morning trading then recovered to close off six cents at $52.3125.

First Union said it plans to eliminate 5% to 10% of its work force in a drive to reduce expenses by up to $400 million this year. Analysts said the numbers were consistent with the lowered earnings projections the company had announced in January.

Beyond that, analysts came away from the meeting with mixed feelings about First Union.

"It eliminates a number of questions and sets the table for better price performance in the stock going forward," said Frank J. Barkocy banking analyst at Josephthal & Co.

But R. Harold Schroeder, a banking analyst at Keefe, Bruyette & Woods, called First Union's message "inconsistent."

"We are watching a work in progress," Mr. Schroeder said. "They are building capital markets and capital management and spending on advertising, and they're cutting also."

George Bicher, an analyst at BT Alex. Brown, said First Union executives appeared "repentant" in discussing their cost-cutting plans.

"They were not specific with details," Mr. Bicher said. "But the size of the cuts suggests there may be a bigger revenue hole than we thought."

The cuts, which could affect as many as 7,200 positions, will come from traditional lines of business with narrower profit margins, the bank told analysts on Thursday. First Union will also close branches as it seeks to move customers to electronic banking services.

As part of the restructuring, First Union will take a first-quarter charge. But the charge is expected to be offset by a gain of 13 to 15 cents per share from the sale of CoreStates Electronic Payment System, executives said.

The $230.7 billion-asset Charlotte, N.C., banking company began lowering profit expectations last month as it examined expenses and possible cuts.

"We're still in the process of a review," a spokeswoman said. But she did say the cuts would not involve "high-growth areas," like capital markets and capital management.

Analysts say economic pressures may prompt other banks to begin cutting jobs.

"Banks will have to keep pressure on the cost side of the equation," said Ronald Mandle, banking analyst at Bernstein & Co. "They will have to continue to look at the relationship of revenue growth to expense growth and make sure they have a positive gap."

Company executives suggested to the analysts that a merger of equals is still possible, but not imminent. "They put the odds of any merger of equals at 10% over the next 24 months, and 33% in the third year," said Mr. Barkocy said.

Right now, First Union wants to focus on earnings growth. In early January, the Wall Street consensus for 1999 earnings was $4.32 per share, according to First Call Corp. But First Union said at the end of January that it expected yearend results to range from $3.96 to $4.11 per share. The company now says it is "comfortable" with a $4 per share target, analysts said.

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