Wachovia Corp increased its previously reported second-quarter loss to US$9.11 billion to cover costs to settle a probe of auction-rate securities sales, and said it will cut more jobs as the housing market deteriorates.
The fourth-largest US bank is now reporting a loss of US$4.31 per share, up from the US$8.86 billion, or US$4.20 a share, it reported on July 22, according to its quarterly report filed on Monday with the US Securities and Exchange Commission (SEC).
According to the filing, the bank now expects to eliminate 11,350 positions, including 6,950 active employees and 4,400 open positions. The additional cuts will come from mortgage operations, spokeswoman Christy Phillips-Brown said. The cuts affect about 5.8 percent of Wachovia’s 120,000-person workforce.
Separately, Wachovia said the SEC may recommend civil charges against its main banking unit in connection with municipal derivatives transactions.
It also said various state attorneys general have issued subpoenas over that matter. The bank said it was cooperating with the probes. Bank of America Corp reported receiving its own subpoenas last week.
The quarter marks the second in a row when Charlotte, North Carolina-based Wachovia revised results to increase the size of its reported loss. Wachovia increased its first-quarter loss to US$708 million from an original US$393 million because of a write-down tied to life insurance policies.
Auction-rate debt has interest rates that reset through periodic auctions, typically held every seven, 28 or 35 days. Once thought safe, much of the market has been frozen since brokerages in February stopped supporting the debt.
Wachovia said it added US$500 million to legal reserves to cover a possible settlement. It is in talks with regulators to resolve matters related to auction-rate debt, after regulatory settlements last week by Citigroup Inc and UBS AG. Missouri is leading the multi-state probe. Wachovia’s brokerage unit, Wachovia Securities, is based in St Louis.
The bank has been among the lenders hardest hit by the US housing crisis, following its US$24.2 billion purchase of California mortgage specialist Golden West Financial Corp in October 2006, just as the mortgage market was peaking.
Wachovia expects US$525 million to US$650 million in restructuring costs for the job cuts.
Chief executive officer Robert Steel, a former US Treasury Department official, is trying to cut US$2 billion in expenses by the end of next year.
The bank decided last week to close its mortgage lending offices in 16 US states where it has no retail branches, and in three other states where it has few branches, spokesman Don Vecchiarello said.
Wachonia still has mortgage lending offices in 18 US states, and offers home loan services by phone, Internet and direct mail, he said.
Shares of Wachovia closed on Monday up US$0.28 at US$18.21 on the New York Stock Exchange. They have fallen 52 percent since the beginning of the year.
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