Wachovia Cuts in Line, Sets Dour Mood for Banks? Quarterlies

Another U.S. bank surprised Wall Street Monday with an unexpected loss related to increasing credit losses and write-offs, setting a troubling tone for a week which will see most major credit issuers release results for the first quarter of 2008.

Charlotte, N.C.-based Wachovia Corporation (NYSE: WB) said Sunday that it was moving up its Q1 2008 earnings release to Monday morning. Wachovia had been slated to report its results this Friday.

The news was not good for the fourth-largest bank in the U.S. Wachovia shocked investors by reporting a net loss of $393 million for the first quarter compared with net earnings of $2.3 billion in the same period of 2007. Revenue in the quarter fell 4.5 percent to $7.9 billion.

"I’m deeply disappointed with our first quarter results, but I am confident we’re taking prudent and appropriate actions in this challenging period to restore Wachovia to a more profitable path,” said CEO Ken Thompson in a press release.

Wachovia’s provision for credit losses in the first quarter was $2.83 billion, compared with $1.5 billion in the fourth quarter and $177 million in the first quarter of 2007. The bank said most of its losses were related to the company’s Golden West mortgage business, which concentrates on mortgages in California, a region hard-hit by the subprime mortgage crisis. Wachovia purchased the firm in 2006 for $25 billion.

But the operating results weren’t what shocked investors and the Wall Street illuminati. Wachovia said that it was slashing its dividend from 64 cents per share to 37.5 cents a share to conserve cash. The company also announced a plan to raise $7 billion in capital by selling shares to investment houses at a 14 percent discount to its closing price of $27.81 on Friday.

With the move to Monday, Wachovia essentially cut in line of major consumer credit issuers scheduled to report this week, including:

US Bancorp – Tuesday, 9:00 am Eastern
JPMorgan Chase – Wednesday, 9:00 am Eastern
Capital One – Thursday, 5:00 pm Eastern
PNC Financial – Thursday, 11:00 am Eastern
Citigroup – Friday, 8:30 am Eastern

Consumer banking and credit card giant Bank of America is scheduled to report its first quarter results Monday April 21.

Wall Street has been skittish about major bank results since industrial bellwether General Electric missed estimates and reported Friday a 6 percent drop in earnings in the first quarter. The losses were led by trouble at the firm’s commercial finance division, which saw a 20 percent decrease in profits, and consumer credit arm GE Money, which saw profits fall 19 percent in the quarter.The two units accounted for $14.9 billion in revenues in the first quarter, more than 35 percent of the corporation’s total revenues. The stock market reacted by dropping more than 250 points Friday.