Wachovia Corp. yesterday proved that despite being based in North Carolina, it can compete with its bigger commercial and investment banking brethren in New York when it comes to racking up mortgage-related losses.
Following a path blazed by financial titans such as Citigroup, Morgan Stanley and Merrill Lynch, the Charlotte, N.C.-based bank yesterday said in a regulatory filing that it will book $1.7 billion in write-downs and charges and said the value of its various structured bonds have continued to decline.
The bank also described all the asset classes backing the troubled securities as “extraordinarily volatile.”
In addition to a $600 million provision for bad loans, the bank’s Securities and Exchange Commission filing said that various mortgage-related securities dropped $1.1 billion in value in October.
The bad news came just months after Wachovia recorded its first quarterly earnings decline in six years, and came on top of the $1.3 billion in write-downs it took in the third quarter.
Wachovia became the latest in a parade of financial giants over the past two weeks to disclose horrors related to soured subprime mortgage and collateralized debt obligation bond bets.
Earlier in the week, Morgan Stanley acknowledged that it was facing at least a $3.7 billion write-down, and a likely $2.5 billion hit to its earnings. Late last Sunday, Citigroup copped to facing a mega write-down of between $8 billion and $11 billion.
The bad news sent the rumor mill into overdrive on Wall Street’s trading desks, with much of the chatter centering on the financial health of London’s Barclay’s Bank.
Barclay’s president in a memo to employees tried to calm fears, but at one point the bank’s shares were down 9 percent.
Wachovia has been aggressively reducing its asset-backed securities-based collateralized debt obligation holdings over the past quarter – the primary driver of losses given the complete collapse of prices in those markets.
The bank now holds about $676 million in CDOs, compared with $1.8 billion at Sept. 30.
Wachovia closed at $40.65, up 35 cents.