Wachovia nearly doubles 1st-qtr loss to $708 mln

By Jonathan Stempel

NEW YORK (Reuters) - Wachovia Corp WB.N, the fourth-largest U.S. bank, on Tuesday nearly doubled its previously reported first-quarter loss to $708 million because of a write-down tied to life insurance policies.

The loss available to common shareholders now equals 36 cents per share, 80 percent more than the $393 million loss, or 20 cents per share, that Wachovia reported on April 14.

The write-down is the latest blow for the Charlotte, North Carolina-based bank, which has struggled with mounting mortgage losses, and in the last two weeks faced up to $1.14 billion of unrelated costs for legal and regulatory matters.

"This is emblematic of a company whose main focus, up until this year, was on growth," said Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine, who has a "sector perform" rating on Wachovia. "The controls and procedures that should have been in place, were not in place."

Wachovia said it increased its first-quarter loss by $315 million after reviewing $360 million of stable value agreements provided by a third-party guarantor.

It said these related to three contracts in Wachovia's bank-owned life insurance portfolio.

Bank-owned life insurance can insure against the lives of employees and directors. Proceeds help offset the cost of providing employee benefits, and help banks manage risk.

Wachovia disclosed the increased loss in a U.S. Securities and Exchange Commission filing. It said it may realize benefits from these agreements as gains in future quarters.

On April 30, Wachovia said it may take a $800 million to $1 billion charge because of a federal appeals court decision concerning the taxation of lease transactions.

Five days earlier, it agreed to pay up to $144 million to settle federal allegations it failed to stop telemarketers that had accounts at the bank from schemes targeting the elderly.

Wachovia is also struggling with losses in its $121.2 billion portfolio of "option" adjustable-rate mortgages, which let borrowers pay less than the interest due.

It became a big provider of option ARMs when it paid $24.2 billion for Golden West Financial Corp in October 2006. Chief Executive Ken Thompson has said the purchase was poorly timed.

The bank last month also offered $8.05 billion of common and preferred stock and cut its dividend 41 percent to bolster capital.

Wachovia shares slipped 2 cents to $29.76 in afternoon trading on the New York Stock Exchange.

(Additional reporting by Emily Chasan; editing by Dave Zimmerman and Maureen Bavdek)