Wachovia CEO Bob Steel, who took the helm in July, knows he has his work cut out for him. This bank’s been hit just as hard as any other financial throughout the housing slump and credit crunch. But Steel sprung into action as soon as he started the job, and it appears that he has the company on track for a recovery.
Steel’s strategy involves taking responsibility for the state of Wachovia and understanding the issues the bank faces. The CEO said it’s imperative that his team not only knows the challenges they face but that they talk about them openly. He’s also focused on the balance sheet. Within two weeks of being on the job, Steel cut the dividend. The firm is also reducing expenses by $1.5 billion and cutting the entire balance sheet by $20 billion. Steel expects to generate as much as $6 billion in incremental capital in the next year.
Some analysts, though, namely Oppenheimer & Co.’s Meredith Whitney, say that Wachovia is a bit too optimistic about its situation, particularly its California mortgage exposure. They say the bank needs to mark down its estimates for that portfolio.