CHARLOTTE - Struggling Wachovia laid out painful steps for a turnaround Tuesday, and chief executive Bob Steel made clear that the Charlotte bank's troubles aren't over.

The bank, which announced a whopping second-quarter loss of $8.9 billion, said it would cut more than 10,000 jobs, slash the quarterly payout to shareholders and shake up the mortgage unit that has plagued its bottom line.

"I can't tell you that the improvements will be smooth and continuous from here," said Steel, who was brought in two weeks ago to right the tarnished company.

Steel reaffirmed his commitment to tackle -- and perhaps sell -- the bank's problem units, and he repeated his commitment to keep the bank independent. He hopes the dividend cut and other cost-cutting will save $5 billion by the end of 2009. Steel said defaults will continue to rise in the bank's Pick-A-Payment mortgage portfolio, which has been the root of much of the bank's recent troubles.

The news was far better Monday for crosstown rival Bank of America, which beat Wall Street expectations and posted higher profits than peer banks, even though its earnings fell over the year.

Still, the markets rewarded Steel and his team. Though Wachovia shares have fallen sharply since last summer, they rallied 27 percent Tuesday to $16.79.

Wachovia's plan includes laying off 6,350 people. In addition, the company will eliminate 4,400 positions that are either already open or held by contractors. That's a total job loss of 10,750.

About 70 percent of the new layoffs will be in the mortgage unit, which had shed 2,000 workers from last July through May as the credit crisis took root. Some of the positions left open also are in mortgages. The company did not provide details about the location of job losses.

Dick Bove, an analyst at Ladenburg Thalmann, said the layoffs announced Tuesday could be just the beginning.

"These companies have dozens and dozens of divisions that no one has ever heard of," he said. "There are plenty of businesses that they will cut back, sell, reduce."

Loss: $4.20 per share

The numbers for Wachovia have gone from bad to worse. The bank lost $707 million in the first quarter -- its first trip into the red since 2001. But that was minuscule compared with Tuesday's loss, which was 12 times as big.

The second-quarter loss of $8.9 billion represents $4.20 per share. A year ago, Wachovia earned a record $2.3 billion, or $1.22 per share.

"These bottom-line results are disappointing and unacceptable," said Lanty Smith, the board chairman. "While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility."

Analysts have speculated that Wachovia's low share price makes it an attractive target to be acquired, but Steel and Smith said Tuesday that they envisioned Wachovia remaining independent. Several analysts said they think the bank will stay independent.

"I can't imagine any U.S.-based company purchasing them -- it would take so much precious capital to do so," said Jaime Peters, an analyst at Morningstar.

Gerard Cassidy, an analyst at RBC Capital Markets, said a sale or takeover might happen in several years but not in the near term. "I have yet to see a new CEO come in and the first major strategic decision they make is to sell the company that hired them," he said.

Steel "will be given some time to work things out," said Nancy Bush of NAB Research in New Jersey.

Wachovia announced numerous strategies for saving money, in addition to the layoffs and the changes in the mortgage portfolio, as it hopes to shore up $5 billion by the end of 2009.

It slashed its dividend, the quarterly payout to shareholders, to 5 cents per share from 37.5 cents. That's the second time this year the bank has cut the dividend; a year ago, Wachovia was paying 64 cents a share.

The company also plans to reduce its number of credit-only commercial borrowers and won't reinvest maturing securities. It will consider selling "noncore assets," but Steel declined to answer questions about what those might be.

Bad loans spike

Charge-offs, or loans the bank doesn't expect to collect on, increased to $1.3 billion from $150 million over the year. The losses were driven by commercial and consumer real estate, especially Pick-A-Pay mortgages. Don Truslow, the chief risk officer, said he expects those defaults to rise through 2010. Many of the mortgages were made to people with poor credit quality who couldn't afford them. The bank has tightened its standards for making loans.

Cassidy, the RBC Capital Markets analyst, said the bank is "working very hard to resolve those problems, but the floodgate is still wide open," given slowdowns in the housing market and the broader economy.

(Stella M. Hopkins and Rick Rothacker of The Charlotte Observer contributed to this report.)