Posted on Tue, Jul. 22, 2008

Wachovia reports $8.9B loss, will cut 10,750 jobs
By CHRISTINA REXRODE - The Charlotte Observer

Wachovia Corp. announced a whopping second quarter loss of $8.9 billion this morning, with plans to shake up its mortgage unit, slash its dividend payout to shareholders, and cut thousands of jobs.

Chief executive Bob Steel, hired less than two weeks ago to bring the struggling bank back to its former glory, had hinted that he envisioned a smaller, leaner Wachovia. Today, in his first earnings announcement, he kept his word, announcing numerous other plans to preserve capital.

Wachovia, South Carolina's largest bank by deposits, also said it will cut 10,750 positions. The initiative, outlined in earnings materials released today, eliminates 6,350 active positions and 4,400 open positions and contractors.

The bank said the expense reductions come on top of previously announced job cuts in areas such as corporate and investment banking. The bank will continue its expansion in the West, where it has been building branches and hiring bankers, but at a slower pace.

At the end of June, Wachovia had 119,952 employees, down from 120,378 at the end of March.

About 40 percent of the $1.5 billion in savings will come from job cuts. The company will save about $490 million in the second half of this year, but that will be offset by severance and other costs.

Wachovia is also cutting marketing and other expenses. It said it reviewed 500 existing and planned capital projects and is delaying or canceling projects that will save $350 million in expenditures that had been planned for 2009.

Wachovia announced this morning that it plans to cease making mortgages through third-party brokers. At the end of the first quarter, about 30 percent of the bank’s mortgage loans were made through third-party brokers. As recently as last month, the bank said it remained committed to using those brokers, especially in areas where it doesn’t have brokers.

But in a memo to employees yesterday, Tim Wilson, the head of loan origination for Wachovia Mortgage, wrote: “Going forward, we will primarily focus on customers who have relationships with the bank, and who are located in geographies where Wachovia branches are located.â€