Wachovia Corp posts shock $393m loss

by Richard Kilner

Story link: Wachovia Corp posts shock $393m loss

Wachovia Corp, America’s fourth biggest bank, has recorded a surprise first quarter loss of $393m.

The shock result is being attributed to credit issues, particularly with mortgages.

In response to the loss, Wachovia is reducing its dividend to save $2bn per annum and seeking to raise $7bn in capital through a stock offering.

Nor was the bank helped by the decision of Ken Thompson, the firm’s CEO, to purchase mortgage lendng firm Golden West Financial two years ago for a price tag of $24.2bn.

Unfortunately for Wachovia and Thompson, Golden West’s loans were heavily hit by the subprime mortgage crisis.

Next week Thompson will face Wachovia’s annual meeting, where he will have a difficult task explaining the shock first quarter loss and slashed dividend to shareholders who have seen the value of their stakes halve over the course of a year.