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Wachovia Raises Second-Quarter Loss, to Cut Jobs

Wachovia increased its previously reported second-quarter loss to $9.11 billion to cover costs to settle a probe of auction-rate securities sales, and said it will cut more jobs as the housing market deteriorates.

The fourth-largest U.S. bank is now reporting a loss of $4.31 per share, up from the $8.86 billion, or $4.20 a share, it reported on July 22, according to its quarterly report filed Monday with the U.S. Securities and Exchange Commission.

A Wachovia branch bank is shown in a Charlotte, N.C. file photo from July 20, 2006. After a rough year, the banking industry appears headed for another in 2007. (AP Photo/Chuck Burton, File)
Chuck Burton
A Wachovia branch bank is shown in a Charlotte, N.C. file photo from July 20, 2006. After a rough year, the banking industry appears headed for another in 2007. (AP Photo/Chuck Burton, File)

Wachovia also now plans to cut 6,950 jobs, 600 more than it had disclosed, with the additional cuts coming from mortgage operations, spokeswoman Christy Phillips-Brown said.

The cuts affect about 5.8 percent of Wachovia's 120,000-person workforce.

Wachovia also is also eliminating 4,400 open positions.

Separately, Wachovia said the SEC may recommend civil charges against its main banking unit in connection with municipal derivatives transactions.

It also said various state attorneys general have issued subpoenas over that matter. The bank said it was cooperating with the probes. Bank of America reported receiving its own subpoenas last week.

The quarter marks the second in a row when Charlotte, North Carolina-based Wachovia revised results to increase the size of its reported loss.

Wachovia increased its first-quarter loss to $708 million from an original $393 million because of a write-down tied to life insurance policies.

Auction-rate debt has interest rates that reset through periodic auctions, typically held every seven, 28 or 35 days. Once thought safe, much of the market has been frozen since brokerages in February stopped supporting the debt.

Wachovia said it added $500 million to legal reserves to cover a possible settlement. It is in talks with regulators to resolve matters related to auction-rate debt, after regulatory settlements last week by Citigroup and UBS.

Missouri is leading the multi-state probe. Wachovia's brokerage unit, Wachovia Securities, is based in St. Louis.

The bank has been among the lenders hardest hit by the U.S. housing crisis, following its $24.2 billion purchase of California mortgage specialist Golden West Financial Corp in October 2006, just as the mortgage market was peaking.

Wachovia expects $525 million to $650 million of restructuring costs for the job cuts. Chief Executive Robert Steel, a former U.S. Treasury Department official, is trying to cut $2 billion of expenses by the end of 2009.

The bank decided last week to close its mortgage lending offices in 16 U.S. states where it has no retail branches, and in three other states where it has few branches, spokesman Don Vecchiarello said.

Wachovia still has mortgage lending offices in 18 U.S. states, and offers home loan services by phone, Internet and direct mail, he said.

Shares of Wachovia closed Monday up 28 cents at $18.21 on the New York Stock Exchange. They have fallen 52 percent since the beginning of the year.

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