Wachovia loses $8.86 bln, slashes jobs

Wachovia Corp, the fourth-largest U.S. bank, on Tuesday posted an $8.86 bln second-quarter loss, slashed its dividend and announced the elimination of more than 10,700 jobs after losses tied to mortgages soared.
Its shares fell $1.25, or 9.5%, to $11.93 in premarket trading.
The net loss for the Charlotte, North Carolina-based bank equaled $4.20 per share, and compared with a profit of $2.34 bln, or $1.22, a year earlier.
Excluding items, the loss was $1.27 per share, compared with the average analyst estimate of $1.30, according to Reuters Estimates. Results included a $6.06 bln write-down of goodwill because asset values declined, and reflected a $4.19 bln increase in reserves for bad loans.
"The credit deterioration was worse than expected," said Gerard Cassidy, an analyst at RBC Capital Markets, who has a "sector perform" rating on the bank.
"Wachovia is in capital-preserving mode, which means it has to shrink its balance sheet, leading to a vice-like effect on income statement," he added. "Revenue growth will likely shrink, even as operating expenses rise. This will lead to lower earnings, or possibly losses, in the future."
Results included a $975 mln charge related to the tax treatment of leveraged leases, $936 mln of losses from disrupted capital markets, a $590 mln charge for other legal matters, and $391 mln of losses on securities sales.
"These bottom-line results are disappointing and unacceptable," Chairman Lanty Smith said in a statement. "While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility."
Wachovia slashed its quarterly dividend 87% to 5 cents per share from 37.5 cents, and has now lowered it 92% this year.
The bank said it plans to cut 6,350 jobs, affecting more than 5% of its roughly 120,000 employees. Wachovia said it will also eliminate 4,400 open positions and contractors.
Wachovia said it has cut 2,000 retail mortgage jobs, and plans to eliminate 4,400 more in the next year. It said it plans to sell at least $20 bln of loans and securities by year's end, and cut 2009 expense growth by $1.5 bln.