Wachovia posts surprise loss, eyes $7 billion capital

NEW YORK Mon Apr 14, 2008 6:52am EDT

The entrance to the Wachovia Bank in McLean, Virginia, is seen in this October 7, 2003 file photo. REUTERS/Kevin Lamarque/File

The entrance to the Wachovia Bank in McLean, Virginia, is seen in this October 7, 2003 file photo.

Credit: Reuters/Kevin Lamarque/File

NEW YORK (Reuters) - Wachovia Corp WB.N, the fourth-largest U.S. bank, on Monday posted a surprise first-quarter loss as credit losses soared and said it would cut its dividend and raise $7 billion in capital.

The net loss available to common stockholders was $393 million, or 20 cents per share, compared with a year-earlier profit of $2.3 billion, or $1.20 per share.

Excluding items, the loss was $270 million, or 14 cents per share. Revenue on a taxable equivalent basis fell 5 percent to $7.9 billion.

Analysts on average expected profit of 48 cents per share on revenue of $8.37 billion, according to Reuters Estimates.

The Charlotte, North Carolina-based company said it had set aside $2.83 billion for credit losses, up from $177 million a year earlier and nearly twice the $1.5 billion it set aside in the fourth quarter. Net charge-offs, or loans it doesn't expect to be repaid, quintupled from a year earlier to $765 million.

Wachovia said it would reduce its quarterly dividend 41 percent to 37.5 cents per share from 64 cents, preserving $2 billion of capital a year.

The capital-raising will include public offerings of common and convertible preferred stock.

The company ended the quarter with a Tier-1 capital ratio of 7.5 percent, up from 7.4 percent at year-end, and above the 6 percent that regulators say indicates a "well-capitalized" bank. The ratio measures a bank's ability to cover losses.

Chief Executive Ken Thompson said the "precipitous decline in housing market conditions and unprecedented changes in consumer behavior" damaged results.

Wachovia has suffered because of its $24.2 billion acquisition of adjustable-rate mortgage lender Golden West Financial Corp in 2006, at the height of the housing boom.

(Reporting by Jonathan Stempel; Editing by Lisa Von Ahn)