Wachovia, other U.S. banks post dismal results
NEW YORK (Reuters) - Wachovia Corp WB.N and Washington Mutual Inc WM.N led several large U.S. banks in posting weak second-quarter results on Tuesday, hurt by soaring losses from mortgages and other debt.
Wachovia reported a $8.86 billion loss, while Washington Mutual said it lost $3.33 billion. Two Ohio-based regional banks, Fifth Third Bancorp (FITB.O) and KeyCorp (KEY.N), also posted losses. Southeast regional banks Regions Financial Corp (RF.N) and SunTrust Banks Inc (STI.N) each said profit fell.
Wachovia and Regions also slashed their dividends, while Wachovia, Fifth Third and KeyCorp incurred charges from their tax treatment of some lease transactions.
Lenders are suffering as the U.S. housing crisis deepens, making it harder for consumers, businesses and homebuilders to stay current on their loans.
"There is no easy fix," said Michael Nix, who helps invest $750 million at Greenwood Capital Associates LLC in Greenwood, South Carolina. "We have to see stabilization in housing and, until we see that, it's hard to get comfortable."
Bank shares nevertheless soared after Wachovia said it would not sell common stock to raise capital.
Wachovia shares closed up 27.4 percent, Fifth Third up 11.7 percent, KeyCorp up 4.3 percent, SunTrust up 16.2 percent, Regions up 9.6 percent and Washington Mutual up 6.2 percent.
The KBW Bank Index .BKX rose 8.9 percent and has risen 39.7 percent in the last week. Part of those gains came as Wells Fargo & Co (WFC.N), JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N) and Bank of America Corp (BAC.N) reported results that were not as bad as investors feared.
Still, "the banking industry is suffering from the tail-end effects of a burst housing bubble," said Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine. "What dominates results now is good, old-fashioned credit deterioration. We're going to see more."
WACHOVIA, WASHINGTON MUTUAL
The $8.86 billion loss at Charlotte, North Carolina-based Wachovia, the fourth-largest U.S. bank, equaled $4.20 per share, and compared with a profit of $2.34 billion, or $1.22 per share, a year earlier.
Wachovia slashed its quarterly dividend 87 percent to 5 cents per share, its second cut this year, and set plans to eliminate more than 10,700 jobs.
Excluding items, the loss was $2.67 billion, or $1.27 per share, compared with the average analyst estimate for a loss of $1.30 per share, according to Reuters Estimates.
Wachovia wrote down $6.06 billion for assets that lost value and added $4.19 billion to reserves for bad loans. It was hurt by its disastrous $24.2 billion purchase in October 2006 of mortgage specialist Golden West Financial Corp.
On a conference call, new Chief Executive Robert Steel said Wachovia would be "realistic and balanced and cautious," as well as "prudently paranoid," in working through the credit environment. Continued...
