Wachovia Profits Fall

by Stewart Douglas

Story link: Wachovia Profits Fall

Investment bank Wachovia has today announced a significant fall in profits over the third quarter of 2007, as a result of market volatility in the wake of the credit crunch over the summer months, according to its profit report released today.

The announcement marks a set of similar results by most other main investment banks over the quarter, with securities on the whole taking a beating in the aftermath of the sub-prime mortgage sector fallout, reflecting an 80% downturn in profit figured at Wachovia over the period.

Profits from its investment banking business were significantly down over the period, falling from $533 million over the period last year to just $105 million, a fact they put down mainly to a charge offset against a loss in value off the recent turbulant market conditions.

The charge, to the value of $1.3 billion is directly linked to losses in a range of its portfolio products directly linked to the sub-prime lending market in the US, which collapsed as a result of increasing interest rates to devastating effect.

Of that charge, around $500 million was directly linked to commercial mortgages and related investments linked to the sub-prime lending sector, which so disastrously faltered earlier this summer.

Wachovia also announced losses today within its asset management division, as a result of several investments that failed to materialise as initially anticipated, resulting in an additional charge of $40 million against revenues for the period.

Speaking today on the losses, chairman Ken Thompson said that whilst they were disappointed with the figures over the period, the bank would look forward to moving upwards with its fixed income investments over the coming year, with a view to increasing profitability in the short term.