Wachovia posts record $8.9 billion quarterly loss
Buying World Savings (a/k/a Golden West) appears to have been a terrible decision as Wachovia took a $6.1 billion charge related to declining asset values on its way to posting a $9 billion loss for the quarter. In addition to suspending it’s wholesale lending department, the bank is slashing jobs, dividends and non-core businesses in an attempt to keep the company going after suffering at the hands of the dreaded pay option, neg-am ARM loan.
From Bloomberg on the loss:
Wachovia Corp., the U.S. bank that hired Treasury Undersecretary Robert Steel as chief executive officer two weeks ago, reported a record quarterly loss of $8.9 billion and cut the dividend by 87 percent. The stock fell as much as 12 percent in early New York trading.
The second-quarter loss of $4.20 a share compared with net income of $2.3 billion, or $1.23, a year earlier, the Charlotte, North Carolina-based company said today in a statement. The loss included a $6.1 billion charge tied to declining asset values.
The second-quarter loss marks the first time Wachovia has posted consecutive losses in at least 20 years, data compiled by Bloomberg show. Wachovia’s report follows the release of better- than-estimated quarterly results at JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co.
Wachovia said July 9 that losses in the three months ended June 30 would be at least $2.6 billion, after $3.3 billion of losses on option-adjustable-rate mortgages. The loans let borrowers skip part of their payment and add the balance to principal. The bank said last month that it stopped offering the mortgages.
Declining house prices in California and Florida, which account for about 70 percent of Golden West’s $121 billion of loans, have left 14 percent of the bank’s option-ARM customers with zero or negative equity in their homes. Merrill Lynch & Co. analyst Edward Najarian estimated on July 9 that losses from the loans would total about $18 billion over four years, double those previously estimated by Wachovia.