TBO.com - TBO is Tampa Bay Online

Wachovia To Slash Jobs As Mortgage Losses Mount

ADVERTISEMENT

The Associated Press

Published: July 23, 2008

CHARLOTTE, N.C. - 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.

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 chief executive officer said he plans to cut $2 billion in expenses by the end of next year and sell parts of the fourth-biggest U.S. bank.

Its shares closed up $3.61 at $16.79.

"Our reported results today are clearly a disappointing performance for which we take responsibility," said Wachovia's chief executive, Bob Steel, on a conference call with analysts.
Wachovia said it lost the equivalent of $4.20 a share in the April-June period. In the same timeframe last year, the bank earned $2.34 billion, or $1.22 a share.

Excluding $6.1 billion in write-downs to the value of its intangible assets and merger-related and restructuring charges of $128 million, Wachovia lost $2.67 billion, or $1.27 a share.

Second quarter results include the bank's acquisition in October of A.G. Edwards Inc., which the bank said is proceeding as planned and is 40 percent complete.

Analysts on average expected a loss of 78 cents a share on revenue of almost $8.4 billion.
Wachovia cut its quarterly dividend to 5 cents a share from 37.5 cents, which will conserve approximately $700 million of capital a quarter. In April, Wachovia slashed its dividend 41 percent.
Wachovia expects to cut expenses during the second half of this year by $490 million and then reduce 2009 spending by $1.5 billion.

As part of that plan, Wachovia said it would lay off 6,350 workers. A majority of those jobs will come from the mortgage area, Steel said. Wachovia also said it will also eliminate 4,400 open positions and contractors.

A Florida spokeswoman for Wachovia, Kathy Harrison, didn't have specifics on potential job cuts in the Tampa Bay area. However, she said cuts here are expected to be "minimal," because Wachovia's Bay area employees generally do not work in business lines targeted for cutbacks. The bank has about 1,500 employees in the area, she said.

Tribune reporter Michael Sasso contributed to this report.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT