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Charlotte, North Carolina: Wachovia, the US 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 per cent.
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 yesterday in a statement.
The writedown and second dividend reduction in three months reflect Steel's response to the Golden West Financial acquisition, which cost former CEO Kennedy Thompson his job after eight years.
Wachovia has dropped more than 75 per cent 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.
Low bar
"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 on Monday to $13.18 in NYSE trading. The shares have declined 65 per cent this year, the second-worst performance on the 24-member KBW Bank Index behind National City.
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, Citigroup 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 per cent of Golden West's $121 billion of loans, have left 14 per cent 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.
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