Wachovia's Lonely Leader And Its Losses

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Wachovia's dismal results raise questions about whether or not the company can remain independent. It's second-quarter loss went beyond it's $6.1 billion, for a total loss of $8.66 billion. The only upside is that the loss per share excluding write downs (Wall Street's new favorite nonsensical financial measure) of $1.27 was in line with the numbers Wachovia telegraphed earlier this month.
Rumors that Wachovia may have to partner up have been circulating for some time now. Some are saying that the appointment of former Treasury official Robert Steel makes a sale of the company more likely. Steel has no commercial banking experience but a lot of experience in investment banking, which could mean he has essentially been hired as an in-house investment banker to arrange a deal for the company.
The main obstacle to a sale of Wachovia, however, may be the absence of buyers. Wachovia is the fourth largest banking chain in the US. It doesn't have the kind of investment banking and trading portfolio that reportedly attracted some private equity buyers to Bear Stearns. And the biggest banks, JP Morgan and Bank of America, are busy digesting recent acquisitions. Citigroup is still facing pressure to sell off assets and unwind parts of its global megabank structure.
So it's all too possible that Steel, whatever his intentions might be, will have to find a way out of Wachovia's mess without help from a buyout-bailout.

Wachovia Swings To 2Q Loss; Dividend Cut To 5 Cents/Share
[Dow Jones]

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