×

Wachovia Hires Goldman Sachs for Loan Advice

Wachovia has hired Wall Street investment firm Goldman Sachs Group for advice on the bank's loan portfolio.

Wachovia spokeswoman Christy Phillips-Brown said Tuesday the firm was hired to analyze the Charlotte-based bank's loan portfolio and evaluate various alternatives. Phillips-Brown declined to comment further.

Last week, reports circulated that Wachovia had retained Goldman to aid its search for a new chief executive. Earlier this month, the bank forced out CEO Ken Thompson amid rising loan losses and a series of miscues.

Wachovia ousted Thompson less than a month after the bank stripped him of his chairman title. At the time, interim CEO Lanty Smith said it was "a step that was taken after very careful consideration" and one that was precipitated by no single event but rather a "series of previously disclosed setbacks."

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.

As the nation's housing market began to stumble, Wachovia's executives continued to defend the purchase and began to incorporate Golden West's business practices into its own. Thompson only later acknowledged the timing of the deal was poor and he was forced to set aside billions of dollars to cover losses from problem loans.

In April, before Wachovia slashed its dividend 41 percent and reported what was to become a $707 million first-quarter loss, it said it would revise the underwriting policies in its mortgage loan business -- a step that could make it harder to take out a home loan at the bank.

Even so, management remains tightlipped about additional changes, and the bank's share price continues to tumble.

Wachovia's share price has plunged more than 68 percent over the past year. But its shartes rose 43 cents, or 2.6 percent, to $17.35 in morning trading Tuesday.

"They are just not talking, that's making people nervous," said Tony Plath, an associate professor of finance at the University of North Carolina at Charlotte. "The stock has been at a takeover price for about a week."

Speculation of potential buyers, particularly New York's JPMorgan Chase, continue to circulate.

Chairman and interim CEO Lanty Smith is leading a search for Thompson's permanent replacement. Smith has said the board believes it's best the bank remains independent.