Report: Wachovia In Talks for Sale

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

At least two major banks were reportedly in talks today to buy Wachovia Corp., the latest U.S. bank to be the focus of investor anxiety over mounting losses tied to toxic assets.

The New York Times reported on its Web site that Citigroup Inc. and Wells Fargo & Co. are bidding in a possible emergency takeover of Wachovia, which is based in Charlotte, North Carolina.

The Wall Street Journal also listed Spain’s Banco Santander SA as a possible bidder. In London, meanwhile, British media reports said that Santander was expected to buy the retail banking operations of troubled mortgage lender Bradford & Bingley, which was being nationalized.

Both papers cited people familiar with the talks who they did not name.

A Wachovia spokeswoman, Christy Phillips-Brown, declined to comment on the reports, as did a Citigroup spokeswoman, Christina Pretto. Wells Fargo spokesmen could not immediately be reached for comment.

Wachovia’s shares fell 27% in regular-session trading on Friday, and shed an additional 15% in after-hours dealings to end the week at $8.50, as investor worries heightened.

Wachovia’s current problems stem largely from its acquisition of mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the nation’s housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West’s specialty, which let borrowers skip some payments.

But like many other banks, Wachovia stands to benefit from the passage of the government’s proposed $700 billion rescue plan — the details of which were emerging from Washington today.

This summer, Wachovia reported a $9.11 billion loss for the second quarter, announced plans to cut 11,350 jobs — mostly in its mortgage business — and slashed its dividend. Wachovia also boosted its provision for loan losses to $5.57 billion during the second quarter, up from $179 million in the year-ago period.

Earlier this month, Wachovia said it was on track to reduce securities and outstanding loans on its balance sheet by $20 billion this year, which will free up $1.5 billion in capital.

Additionally, Wachovia still expects to reduce expenses by $2 billion by the end of 2009.

However, the second-half expense benefit will be more than offset by $525 million to $650 million in severance and benefit costs related to previously announced job cuts, Wachovia said.

The New York Sun

© 2023 The New York Sun Company, LLC. All rights reserved.

Use of this site constitutes acceptance of our Terms of Use and Privacy Policy. The material on this site is protected by copyright law and may not be reproduced, distributed, transmitted, cached or otherwise used.

The New York Sun

Sign in or  Create a free account

By continuing you agree to our Privacy Policy and Terms of Use