Reengineering is back, again.

Another round of job cutting and strategic business "realignments" is making its way through the biggest U.S. banking companies as executives try to make up for sluggish revenue growth by chopping expenses. Wachovia Corp., which said Monday that it would trim 8.5% of its work force, is just the most recent example. Since last month, Bank of America Corp., First Union Corp., and Bank One Corp. have all announced major restructurings. Many observers said they expect the cost-cutting ax to continue to fall at regional banking companies throughout the year.

As in previous periods of cost-cutting, companies that have been growing rapidly by acquisition or by aggressive market expansion on their own are now facing less rosy prospects for revenue growth. Wachovia, like many other banking companies, said in June that it was reducing its expectations for revenue growth because rising interest rates were choking off business from capital markets, mortgages, and investment services.

Strangely, though news of expense cutting was once cheered, Wall Street was not so sanguine Tuesday about Wachovia. Some analysts said they were concerned that the $70.8 billion-asset Winston-Salem, N.C., banking company could get distracted by internal issues just as it needs to push for more business. Shares of Wachovia declined 1.4% in trading on Monday and another 1.9% Tuesday, when they closed at $55.6875.

"The cost cuts are pretty large, and they could potentially cut too much," said Jennifer Thompson, an analyst at Putnam Lovell de Guardiola, who downgraded her outlook on Wachovia after the Monday announcement.

Consultants said it is the classic conflict facing companies that want to boost profits: Either generate revenues through existing or new businesses or cut costs by shedding businesses and employees. The first route entails spending money in the near term. The second is not necessarily a long-term solution, consultants said.

"It's often impossible to focus on cost reduction and revenue generation at the same time," said David Kaytes, a consultant at Novation Associates in New York.

In an interview Monday, Wachovia chairman L.M. "Bud" Baker said the restructuring, which will include up to $100 million of charges for severance and other items, was just one part of a much broader effort at the company to focus its businesses, cut bureaucracy, and make sure resources are put to good use.

Wachovia is making the cuts at a time when it feels under more pressure to boost performance, Mr. Baker said. The average efficiency ratio - the measure of how much a bank spends for every dollar of revenue - has been creeping up at the 50 largest banks. Wachovia's efficiency ratio has also slowly crept up in recent years, hovering at about 54.6% at the end of 1999, still better than the industry average.

Mr. Baker even joked that he was considering whether to cut off the hot water at some branches. Wachovia, he explained, had been investing heavily in technology and growth businesses, and expense growth had begun to outpace revenues. "You have to spend money to build the business, but what tends to happen is the costs bubble up over time."

The executive has been forthright about his desire to build a bigger banking company. In a letter to shareholders more than three years ago, Mr. Baker said, "Wachovia must be larger. I believe it reasonable to propose that in the next three years, Wachovia conceivably could double its size and earnings through internal growth and acquisition." That statement was part of Mr. Baker's letter to shareholders in the company's 1996 annual report, which was published in early 1997.

He didn't quite get there. Wachovia's size, as measured by assets, grew 43.6% from the time that letter was written through the end of last year. Profits have risen about 57%.

Return on equity has improved from 17.62% at the end of 1996 to 18.62% at the end of last year.

In a statement Monday, Mr. Baker said he wants to use the restructuring to cut bureaucracy and "instill an entrepreneurial spirit" in the company. This echoes his earlier goal, outlined in the same 1997 letter to shareholders. These goals "will require great change," the letter said. "They ultimately must result in the creation of a new, disciplined but entrepreneurial Wachovia, whose pathways are unobstructed in a rapidly changing world."

Analysts said they expect many of the large regional companies to take the same route, including U.S. Bancorp, KeyCorp, National City Corp., and SunTrust Banks Inc. All four have commented that rising rates have dampened their revenue growth prospects.

"It's a preemptive move," said Michael Mayo, an analyst at Credit Suisse First Boston. "It's not a Wachovia event but an industry one."

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