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Stock Analyst Update

First Union on a Long Road to Recovery

Latest cleanup is welcome, but a surge in profits is years away.

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First Union (FTU) released a much-anticipated restructuring plan Monday that calls for the sale of some problematic businesses, but it may be years before this company hits its stride again.

The Charlotte, N.C.-based bank said it would stop lending through The Money Store, a subprime-lending company that First Union paid top dollar for in 1998. The company is also selling its mortgage-servicing business to Wells Fargo (WFC) for an undisclosed amount, and it is auctioning off its credit-card business. First Union will also dump some bonds and loans that have declined in value because of higher interest rates and a weakening economy, and it is putting about 85 bank branches up for sale. In all, the company will take $2.8 billion, or $3.00 to $3.10 per share, in net charges in 2000 and early 2001.

Laura Pavlenko Lutton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.