Wachovia Corporation lost $8.86 billion in the second quarter, and said Tuesday it was slashing its dividend and cutting 6,350 jobs after losses tied to mortgages soared. Its stock fell as much as 12 percent in early New York trading.
The nation’s fourth-largest bank by assets says it lost the equivalent of $4.20 per share in the April-June period. In the same timeframe last year, the bank earned $2.34 billion, or $1.22 per share. The loss included a $6.1 billion charge tied to declining asset values.
Wachovia has dropped more than 75 percent in New York Stock Exchange composite trading since it spent $24 billion two years ago to buy Golden West Financial Corporation just as home prices were peaking. Golden West is a California mortgage lender known for exotic loans.
Big banks, such as Bank of America Corp. and National City Corp., have stopped making loans through brokers entirely, relying instead on their loan officers. National City said it was forced to do so by a continuing downturn in loan demand, while Bank of America said it saw better “long-term opportunity” in working through its own loan officers.
The Charlotte-based bank cut its quarterly dividend to 5 cents per share from 37.5 cents, which will conserve approximately $700 million of capital per quarter. In April, Wachovia slashed its dividend 41 percent. The company is moving to “sell selected non-core assets” and reduce the number of business customers who only use the bank for loans rather than other services. Wachovia expects to cut expenses during the second half of this year by $490 million and then reduce 2009 spending by $1.5 billion.
Wachovia shares have declined 65 percent this year, the second-worst performance on the 24-company KBW Bank Index behind National City Corp., Ohio’s largest bank. The stock fell to $12.36 at 9 a.m. in New York. Fitch Ratings cut Wachovia one level to A+ from AA-, citing its mortgage business.