Wachovia Fourth Largest U.S. Bank Going Down In Flames
by Jeff Davis
An Associated Press article reports “Wachovia Corp. reported a surprisingly large second-quarter loss Tuesday deflating Wall Street’s hopes that the nation’s big banks are weathering the credit crisis well. The bank said it lost $8.86 billion, is slashing its dividend and eliminating 10,750 positions after losses tied to mortgages soared. Even excluding one-time items, the results substantially missed analysts’ estimates. But by the afternoon its stock joined a modest Wall Street rally and rose as much as 13 percent — after its shares sank to mid-1991 levels in premarket trading, and after Wachovia’s new CEO said he plans to cut $2 billion of expenses by the end of next year and sell parts of the fourth-biggest U.S. bank.”
This is hardly surprising considering Wachovia has been circling the drain for months and it’s never been any secret on the Street. Shareholders are probably praying for a bail out deal, which should put a bottom to their stock’s decline. A number of US banks have been bought up by Arabs lately.
The article notes “‘Three rating agencies — Moody’s Investors Service, Standard & Poor’s and Fitch Ratings — downgraded their ratings on Wachovia’s debt, citing increased expectations of losses in the bank’s mortgage portfolio and its reduced flexibility to raise new capital…Earlier this month, the Charlotte-based bank had projected a $2.6 billion to $2.8 billion quarterly loss, equal to $1.23 to $1.33 per share, excluding goodwill items… Wachovia’s new management has pulled its head of out the sand and is fully acknowledging the problems not challenges,’ said Bart Narter, senior analyst at Celent, a Boston-based financial research and consulting firm. ‘While the company’s wealth management, corporate and investment banks, and capital management groups all had more encouraging results than the general bank, the general bank is the bulk of Wachovia and it isn’t performing well.’” (more…)