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New Wachovia Chief Greeted By Stock Plunge

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The Associated Press

Published: July 11, 2008

CHARLOTTE, N.C. - On his first day as the new CEO of Wachovia Corp., Robert Steel saw the stock tumble to a 17-year low and faced questions about his ability to rescue the nation's fourth-largest bank from its own missteps and the roiling credit market.

Even with an impressive resume and connections from Wall Street to Washington, Steel lacks experience running a retail bank, Wachovia's main business. He could, however, help steer Wachovia to a merger or outright acquisition.

Steel, former Treasury Undersecretary and Goldman Sachs Group Inc. executive, was hired late Wednesday to lead the Charlotte-based bank, ending a more than monthlong CEO search.

The announcement of his hiring came at the same time the company detailed just how bad its business has been.
Wachovia said Wednesday that it had put aside $4.2 billion to cover defaulting loans. It also said its second-quarter loss would be between $2.6 billion and $2.8 billion, or $1.23 to $1.33 a share, excluding a goodwill writedown.

The announcement shook investors. The stock closed down $1.16, or 8.1 percent, to $13.13 in New York trading Thursday. Earlier in the session, shares hit $12.65, a 17-year low.
Wachovia shares have fallen by about 75 percent from their 52-week high of $53.10 a year ago.

Credit rating agency Moody's Investors Service put the bank's long-term debt ratings on review for possible downgrade Thursday.

"There's work to be done," Steel told analysts on a conference call.

Steel characterized himself in a separate call with reporters as a "collaborative person" who will draw on the bank's other executives for help. "No one person will have all the answers," he said.

Lanty Smith, who remains Wachovia's chairman after serving as interim CEO, added: "There is nothing in retail and commercial banking that he, as a quick study, can't come to grips with."

Smith and Steel pledged to be transparent when the bank announces second-quarter earnings July 22.

"There are some challenges," Steel said. "I can pledge to you that we're going to deal with them head on."

RBC Capital Markets analyst Gerard Cassidy slashed his share price target on the bank, predicting shares will remain pressured until at least 2009 and casting doubt on whether Steel was up for the challenges ahead.

Cassidy predicted in a note to investors that Wachovia, under Steel, will "incur a significant charge to 'clean up' its problems once and for all, eliminate its dividend and raise additional capital."

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