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| Wachovia stung by credit losses | Wachovia stung by credit losses |
| (30 minutes later) | |
| Wachovia, the fourth-largest bank in the US, has slumped to a quarterly loss and written down the value of its mortgage-backed assets by $2bn (£1bn). | Wachovia, the fourth-largest bank in the US, has slumped to a quarterly loss and written down the value of its mortgage-backed assets by $2bn (£1bn). |
| The bank blamed its troubles on the "severe deterioration" in the US housing market, whose downturn precipitated the global credit crunch. | The bank blamed its troubles on the "severe deterioration" in the US housing market, whose downturn precipitated the global credit crunch. |
| Wachovia is slashing its dividend after making a $350m quarterly loss and plans a rights issue to raise $7bn in cash. | |
| The IMF has warned that losses from the credit crunch could top $1 trillion. | The IMF has warned that losses from the credit crunch could top $1 trillion. |
| 'Housing decline' | 'Housing decline' |
| Wachovia said it was "deeply disappointed" by its performance, which it said had been caused by "the precipitous decline in housing market conditions and unprecedented changes in consumer behaviour". | Wachovia said it was "deeply disappointed" by its performance, which it said had been caused by "the precipitous decline in housing market conditions and unprecedented changes in consumer behaviour". |
| MAIN CREDIT CRUNCH LOSSES UBS: $37.4bn Merrill Lynch: $22bnCitigroup: $21.1bnHSBC: $17.2bnMorgan Stanley: $9.4bnDeutsche Bank: $7.1bnBank of America: $5.3bnBear Stearns: $3.2bnJP Morgan Chase: $3.2bnBayernLB $3.2bnBarclays: $2.6bn IKB: $2.6bnRoyal Bank of Scotland: $2.6bnCredit Suisse:$2bnSource: Company reports Timeline: Sub-prime crisis | |
| It is the latest in a string of top Wall Street names to suffer hefty losses and write down the value of their mortgage-backed investments, whose worth tumbled after thousands of Americans were unable to repay their mortgages. | It is the latest in a string of top Wall Street names to suffer hefty losses and write down the value of their mortgage-backed investments, whose worth tumbled after thousands of Americans were unable to repay their mortgages. |
| Merrill Lynch and Citigroup have suffered combined losses of more than $43bn, although Swiss bank UBS has been worst affected, having to absorb a loss of $37bn. | |
| Wachovia has set aside $2.8bn to cover current and future losses stemming from the housing and credit crises, the bulk of these arising from loans which will not be repaid. | |
| This is almost double the $1.5bn it set aside in the final quarter of last year. | |
| Wachovia has significant exposure to the flaccid housing market through its mortgage lending subsidiary Golden West Financial Corporation, which it bought in 2006. | |
| Wachovia's $350m loss in the first three months of last year compared with a profit of $2.3bn in the same period last year. | Wachovia's $350m loss in the first three months of last year compared with a profit of $2.3bn in the same period last year. |
| 'Prudent action' | |
| The bank said it would save $2bn by taking the "painful" step of cutting its first quarter dividend payment to shareholders by 41% to 0.375 cents per share. | |
| It also plans to tap existing and new shareholders for extra capital through a rights issue, although it did not make clear how much it hoped to secure. | It also plans to tap existing and new shareholders for extra capital through a rights issue, although it did not make clear how much it hoped to secure. |
| "I am deeply disappointed with our first-quarter results, but I am confident we are taking prudent actions in this challenging period to restore Wachovia to a more profitable path," said chief executive Ken Thompson. | "I am deeply disappointed with our first-quarter results, but I am confident we are taking prudent actions in this challenging period to restore Wachovia to a more profitable path," said chief executive Ken Thompson. |
| Credit ratings firm Moody's said Wachovia was facing a "challenging environment". | |
| But it stressed that the bank's strong retail deposit base meant that it did not face any liquidity problems. |