Bank of New England Corp. is cutting 5,600 workers and slashing $300 million in costs, but the troubled company admits that even with the cuts its future is in doubt. The bank, operating under government orders for more than a month, announced the cost-cutting plan Wednesday. But the institution also filed federal documents this week saying it expects to see an increase in troubled loans. Furthermore, the bank acknowledged its future may hinge on whether the slumping New England economy continues to decline. ``Continued deterioration in the New England economy and the real estate market could adversely impact the corporation's recovery efforts,'' the bank said. The job reductions, which will lower the workforce by about one-third, will come through a combination of layoffs, attrition and asset sales. The bank also has frozen hiring, eliminated financial bonuses and suspended raises for bank officers. Analysts said that although the moves should strengthen the bank, its footing remains extremely shaky. The bank gave a similar assessment in documents filed with the Securities and Exchange Commission this week. ``If the corporation is unsuccessful in addressing the corporation's current difficulties, it is likely that external assistance from third parties and@or regulatory authorities will be required,'' the bank said. Bank of New England lost more than $1 billion last year, due largely to bad real estate loans. The bank said that in addition to $2.2 billion in non-performing assets reported at the end of 1989, it had $1 billion in loans that were still performing but where borrowers were experiencing some financial difficulty. The bank said it expects non-performing assets will increase in the first quarter. That could be a sign that problems could be spreading outside the bank's real estate portfolio into other business loans, said Gerard Cassidy, an analyst with Tucker Anthony Inc. ``The key is the economy,'' he said. ``The New England economy is not cooperating.'' The bank said it would lay off about 1,700 employees and would notify them over the next several days. ``These decisions were difficult and they are painful for all of us,'' bank Chairman Lawrence K. Fish said in a letter to employees. ``But difficult as these steps are, it is essential that we take them now to assure our future viability and our ability to rebuild as a stronger, though smaller, Bank of New England,'' he said. ``At the same time, our primary concern as we rebuild is customer service and maintenance of the highest possible credit quality,'' Fish said. An earlier staff reduction plan was canceled by Fish after he was named chairman on March 9. At the time, he ordered a thorough review of the organization's direction, structure, and personnel needs. Personnel cuts, asset sales and other measures are expected to reduce annual operating expenses by approximately $300 million, the bank said. Bank officials said the action was being taken as part of a strategic plan outlining new directions for the corporation. Details of the plan are expected next week. The bank last month announced it had signed federal orders that set tight guidelines for lending practices and other operations. James Moynihan, senior vice president of Advest Inc. in Boston, predicted the bank eventually will sell off all its subsidiaries in Connecticut, Maine and Rhode Island. ``In order to survive, they will have to become a Massachusetts-only bank,'' he said. The results, if successful, would be a ``very competitive bank'' with assets below $20 billion, compared with a $32 billion level last year. The bank said its new strategic plan will try to concentrate on primary banking and lending businesses. Other operations will be eliminated, including processing services, large corporate banking outside of New England, leasing and discount brokerage services. The bank also disclosed that it was being sued in federal court in Pennsylvania by the Penn Mutual Life Insurance Co., which has a $10 million, 14 percent Bank of New England bank note due in 1996. Penn Mutual maintains the bank's asset sales breached covenants in the note. The insurance company asked the court to order the bank to speed up its principal payments. The bank also faces a lawsuit from shareholders who claim company executives misrepresented the bank's financial status by not disclosing the mounting troubles sooner last year.
