First Union to Close Struggling Money Store

CHARLOTTE, N.C. — First Union Corp. said Monday that it’s closing its money-losing Money Store home equity loan business and selling up to 90 branches, part of a $2.8-billion restructuring to bolster its bottom line and stock price.

The nation’s sixth-largest bank also said it will sell its mortgage servicing unit to Wells Fargo and put its credit card business on the auction block while focusing on its profitable core businesses.

First Union said it expects second-quarter earnings of 72 cents to 74 cents per share before restructuring charges of $3 to $3.10 per share.

That is well below Wall Street’s consensus earnings expectation of 85 cents per share, according to the research firm First Call/Thomson Financial. First Union’s second-quarter earnings report is due in mid-July. First Union’s profit slumped 13% in the first quarter.

Despite the warning, First Union shares rose 6 cents to close at $27.88 on the New York Stock Exchange.

The Money Store, based in Sacramento, lends to people with poor credit histories. First Union acquired the business in 1998 for $2.1 billion, which made the bank the nation’s top home equity lender.

First Union employs about 70,000 people, while the Money Store, known for ads featuring retired baseball stars Jim Palmer and Phil Rizzuto, has about 3,000 workers. In a statement, Money Store Chief Executive James Maynor estimated that about 2,350 workers, including 1,600 in Sacramento, would be affected.

First Union warned shareholders twice last year that its earnings would fall short of expectations.

The restructuring follows criticism and slower earnings growth resulting from First Union’s acquisitions of the Money Store and CoreStates Financial Corp. in the late 1990s.

Chief Executive Ken Thompson, making his first address to analysts since taking over as CEO in April, said Monday’s actions will cost $2.8 billion in restructuring and other charges and free up $1 billion in capital for reinvestment in core businesses and share repurchases.