There's a silver lining for Wachovia
Wachovia is reporting quarterly losses of nearly $9 billion, and more than 6,000 workers will lose their jobs as a result. But Dan Grech tells us the news may not be as dire as it first appears.
A Wachovia sign in Atlanta. (Erik S. Lesser/Newsmakers)
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TEXT OF STORY
Bob Moon: The country's fourth-largest bank is reporting quarterly losses of nearly $9 billion -- and more than 6,000 workers will lose their jobs, as a result. The bank is also slashing its dividend by 87 percent.
But here's what Wall Street seems to keep looking for in these numbers: Some kind of silver lining. Marketplace's Dan Grech tells us the news may not be as dire as it first appears.
Dan Grech: It was an ugly quarter for the nation's fourth-largest bank, but Wachovia has been preparing for the worst. The bank added nearly $10 billion to its reserves to cover losses on bad mortgages.
Banking consultant Bert Ely says Wachovia's latest move, to slash dividends, will build up that cushion.
Bert Ely: This strikes me as the prudent thing to do at this time. You don't want to pay out capital at a time when you're experiencing significant losses.
Ely says lower dividends are actually in shareholders' interest:
Ely: Wachovia needs to maintain its capital strength so that it can ride through this storm and not get taken over at a very low price to its stockholders.
Wachovia's problems stem from its $25 billion purchase of Golden West Financial, a California mortgage lender known for its Pick-A-Payment loans.
I'm Dan Grech for Marketplace.
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