 |
|
|
|
|
|
|
 |
Wachovia, the nation's fourth-largest bank by deposits, is the largest bank in the Philadelphia region, where it employs roughly 6,400 people.
The bank, based in Charlotte, N.C., also said it had set aside $4.2 billion pretax to cover bad loans for the quarter, leading to an estimated second-quarter loss of $2.6 billion to $2.8 billion.
The quarterly loss will equal $1.23 to $1.33 per share, excluding an expected write-down of goodwill. Analysts polled by Thomson Financial expected a profit.
"Steel certainly has a great background at Treasury and Goldman Sachs," Gary Townsend, a former bank analyst who is cofounder of Hill-Townsend Capital L.L.C., of Chevy Chase, Md., told Bloomberg News. "The downside is that he's never run a commercial bank."
Steel succeeds Ken Thompson, who was ousted by the bank's board in June after a series of missteps.
Among them was Thompson's decision to buy mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the nation's housing boom.
Investors demanded a management change after losses on Golden West's mortgages piled up, the dividend was cut by 41 percent in April, and the bank raised about $8 billion in new capital. After reporting the first-quarter loss, Wachovia revised the number upward 80 percent to $708 million on May 8. The bank blamed the switch on write-downs for bank-owned insurance policies.
Wachovia was one of the biggest purveyors of so-called option-ARM mortgages, a specialty of Golden West. The adjustable-rate mortgages, marketed as "Pick-a-Pay" loans, allowed borrowers to skip part of their payment and add the sum to their principal.
With home prices in their worst swoon since the Great Depression, the amount owed on some option-ARMs is rising even as the value of the homes they bought is shrinking. That means Wachovia might face losses on mortgages if it is forced to foreclose.
Steel, 56, who has been the Treasury Department's liaison with Wall Street since the fall of 2006, announced his resignation yesterday, effective immediately. He is an alumnus of investment bank Goldman Sachs.
Treasury Secretary Henry Paulson praised Steel and said, "I know he will excel in his future endeavors."
Lanty Smith, who had been interim chief executive, will remain Wachovia's chairman.
Smith has said the company wants to remain independent. Still, some analysts are speculating about a takeover, and Edward Najarian at Merrill Lynch & Co. has said potential buyers include JPMorgan Chase & Co. and Banco Santander SA, Spain's largest bank.
Meanwhile, Merrill Lynch's Najarian said yesterday that Wachovia might lose as much as $18 billion over four years as borrowers default on option adjustable-rate loans.
That estimate is double the potential loss previously cited by Wachovia from the $121 billion loan portfolio acquired in the 2006 acquisition of Golden West, Najarian wrote in a research note.
Wachovia's stock has slid about 62 percent this year amid speculation that more losses lay ahead and that the bank was vulnerable to a takeover at a distressed price. Wachovia shares fell $1.25, or 8 percent, to $14.29 in New York Stock Exchange composite trading at 4:15 p.m. It was up in after-hours trading.
|
|
|
|
|
|
Politics
TOP STORIES
Green
today's poll
express headlines
Promotions
photo GALLERY
|
|
|
|
|
|
|
|
|
|
|
|
|
email this
print this
