NEW YORK, Nov 9 (Reuters) - Wachovia Corp WB.N, the fourth-largest U.S. bank, said on Friday it incurred $1.1 billion of losses in October on mortgage securities, the latest in a parade of banks hit by the credit crunch.
Wachovia’s disclosure comes two days after Morgan Stanley (MS.N) announced it had suffered a $3.7 billion loss stemming from trades on U.S. subprime mortgage securities.
In most cases, the banks with the largest exposures were also among the biggest underwriters of collateralized debt obligations (CDOs), complex securities that invest in asset-backed securities. As the quality of underlying mortgages weakens, demand for CDOs dries up and underwriters are left holding now-illiquid securities.
Below are the top issuers of CDOs so far this year, according to Bernstein Research (value in billions of dollars):
TOP GLOBAL CDO ISSUERS
Bookrunners Value Market share (%) 1 Merrill Lynch $32.176 17.2 2 Citi 26.578 14.2 3 UBS 21.151 11.3 4 Wachovia 12.505 6.7 5 ABN AMRO 10.849 5.8 6 Goldman Sachs 10.075 5.4 7 Banc of America 8.634 4.6 8 Deutsche Bank 8.231 4.4 9 RBS 7.154 3.8 10 Lehman Brothers 6.575 3.5 11 Morgan Stanley 6.277 3.3 Sources: Corporate Reports, Bernstein Analysis (Reporting by Joseph A. Giannone; Editing by John Wallace)