Looks like financials will ger creamed tomorrow once again....
Wachovia Reports Record Loss of $8.9 Billion, Slashes Dividend
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 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 writedown and second dividend reduction in three months reflect Steel's response to the Golden West Financial Corp. acquisition, which cost former CEO Kennedy Thompson his job after eight years. Wachovia has dropped more than 75 percent in New York Stock Exchange composite trading since it spent $24 billion two years ago to buy Golden West just as house prices were peaking.
``This is Steel's chance as the new guy to set the bar low so that he can increase the dividend going forward if their performance improves,'' said David Dietze, president and chief investment strategist at Point View Financial Services in Summit, New Jersey, which owns Wachovia shares.
Wachovia rose 21 cents yesterday to $13.18 in NYSE trading. The shares have declined 65 percent this year, the second-worst performance on the 24-member KBW Bank Index behind National City Corp., Ohio's largest bank.
Falling House Prices
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.
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