Updated from 7:24 a.m. EDT

In what the company termed a "productivity initiative,"

Bank of America

(BAC) - Get Report

will lay off about 7% of its workforce, the bank said Friday.

The company will cut between 9,000 and 10,000 positions out of its 150,000-person workforce, mostly during the next 12 months, taking a $550 million pre-tax charge in the third quarter to pay severance costs. Most job cuts will be in middle and senior management.

The cost cuts will be directed toward new investments in e-commerce, asset management and developing its investment banking business in Asia, the company said in a statement.

"Today's initiatives are a good start," said Kenneth Lewis, Bank of America's president and chief operating officer. "Each year, we plan to improve productivity and reallocate the savings for customer service initiatives and revenue growth opportunities. Improving performance, investing in new technologies and finding better ways of serving the customer are never-ending challenges."

Indicating that the bank's profits goals are presenting a challenge to managers, a spokesman said that, without the job cuts, Bank of America wouldn't have been able to make the new investments and meet its 12% to 15% earnings growth target for 2000 and 2001. "We couldn't achieve 12% to 15% growth and make a ton of investments at the same time," says Bob Stickler, spokesman at Bank of America.

Analysts surveyed by

First Call/Thomson Financial

predicted that Bank of America will earn $5.21 per share this year, an 11% increase from $4.68 in 1999.

One analyst and a money manager said that, due to accounting conventions, Friday's action will give an artificial boost to earnings numbers watched by the Street. Due to its one-time nature, the charge, which works out to $300 million to $350 million after taxes, most likely won't be included in third-quarter operating earnings, and it's the operating profit that's tracked by analysts. However, the lower personnel spending, as well as any revenue boost from new investments, will be reflected in operating income.

"The bank is playing games," said Charles Peabody, analyst at New York-based

Mitchell Securities

, which rates Bank of America a sell. Mitchell hasn't done any underwriting for Bank of America.

"It's an accounting maneuver to get earnings growth," agreed one mutual fund manger who requested anonymity. His fund owns Bank of America shares.

"It's very transparent what we're doing," responded Bank of America's Stickler. "This is the way you run a business. You invest to get revenue growth."

Tom Theurkauf, a banks analyst at

Keefe Bruyette & Woods

, said that the layoffs are the bank's response to pressures on

revenue, which can be seen across the industry.

"There are revenue challenges out there. That had a lot to do with it," says Theurkauf, who rates Bank of America a market perform. His firm hasn't done recent underwriting.

The Keefe analyst also noted that Bank of America didn't increase its earnings guidance after announcing these job cuts and new investments, implying that they were done to offset slower revenue.

Bank of America posted weak overall recurring revenue in the

second quarter. They grew 0.49% to $7.66 billion in the second quarter from the year-ago period, leaving them 6% below first-quarter levels. However, consumer banking revenue was robust. Now, after Friday's news, Theurkauf remarked: "I think that was more a one-quarter phenomenon." And the mutual fund manager who requested anonymity added: "I thought the bank had a pretty good second quarter. But the job cuts are telling me that it was a one-off."

The job cuts aren't entirely surprising to those that follow the Charlotte, N.C.-based company, and investors reacted modestly to the news. Shares of Bank of America closed down 3/8, or 1%, to 46 3/8. When the bank, which has $656 billion in assets,

released quarterly earnings July 17, Chief Financial Officer James Hance told analysts to expect "fairly sizable" job cuts.