Archive for the 'Wachovia' Category
March 9th, 2009, 1:03 pm by Mathew Padilla
Stock of Wells Fargo closed 15% higher today after investor Warren Buffett said the fourth-largest bank will emerge “better-than-ever” from the credit crisis. The stock ended at $9.97, up $1.36 from yesterday, but still only a fraction of its Sept. 19 peak of $39.79.
Speaking on CNBC television, Buffett said Wells Fargo is able to borrow at low cost amid low benchmark interest rates. His comments were picked up by news service Reuters:
Berkshire Hathaway Inc, Buffett’s insurance and investment company, was Wells Fargo’s largest investor at year end, owning a 7.2 percent stake. Buffett suggested that the greatest risk might be the prospect that banks sell more common stock, diluting existing shareholders.
“These are a couple of tough years for losses in the banking business, but you expect a couple tough years every now and then,” Buffett said. “The earning power is going to be greater by far than it has ever been when you get all through with it. The only worry in that is the government will force you to sell shares at some terribly low price.”
I haven’t looked closely at the books of Wells Fargo, but it clearly assumed a lot of bad loans with its acquisition of Wachovia. Wells on Friday slashed its dividend 85 percent to help save $5 billion a year.
Here’s more of Buffett from CNBC:
Even though Wells Fargo is going through a tough couple of years, he looks at its overall business prospects. Wells Fargo prospects are good several years out. Wells could generate $40 billion of annual pre-provision income within a couple of years.
In other news…
Posted in: Company Watch • Wachovia • Wells Fargo | 6 Comments »
November 19th, 2008, 4:14 pm by Mathew Padilla
Bloomberg reports U.S. prosecutors and the Securities and Exchange Commission opened an investigation into whether Wachovia Corp. misled borrowers and investors.
Citing San Francisco U.S. Attorney Joseph Russoniello, Bloomberg writes….
Prosecutors are examining whether Golden West Financial, acquired by Wachovia in 2006, fraudulently lured borrowers into mortgages, such as by switching them into more expensive loans or falsifying financial information so they could qualify, Russoniello said. His office and SEC investigators in San Francisco are also scrutinizing whether the banks misled investors about the quality of Golden West’s loans, he said.
“We are looking down, in terms of what borrowers were told, and we’re looking up at what investors were led to believe,” Russoniello said in an interview today. He characterized the inquiry as preliminary.
Regulators pressed Wachovia in September to merge with a stronger bank, leading Wells Fargo & Co. to top a Citigroup Inc. bid last month to acquire the Charlotte, North Carolina, lender for $14 billion. Wachovia became vulnerable because of expected losses from $120 billion in payment-option adjustable-rate mortgages. The loans were mainly acquired through the $24 billion purchase of Golden West, based in Oakland, California.
Christy Phillips-Brown, a spokeswoman for Wachovia, and SEC spokesman John Nester declined to comment. Wells Fargo spokeswoman Julia Tunis Bernard also declined to comment.
Bloomberg also reports that Golden West co-founder Herbert Sandler wasn’t available for comment, according to an assistant at his San Francisco-based foundation.
Back on Oct. 30, Sandler told Bloomberg Television: “I did not see how problems in the subprime market would roll into the mortgage market and then into the economy. It was not like we enriched ourselves.”
Read the full story HERE.
I have read of the FBI investigating a dozen or more companies tied to the mortgage meltdown including New Century Financial in Irvine and Countrywide in Calabasas. But so far there have been few high-profile arrests — I can recall only the folks who ran the Bear Stearns hedge funds that collapsed last year.
And in other mortgage news…
Posted in: Investigations • Wachovia • Wells Fargo • Investigations | 10 Comments »
October 29th, 2008, 5:18 pm by Mathew Padilla
Wells Fargo said today it got $25 billion from the U.S. Treasury as part of government’s plan to inject banks with capital to jump-start lending to consumers and businesses.
The bank issued 25,000 preferred shares at $1 million per share. The shares pay a 5% annual dividend for the first five years and 9% after that.
The deal, announced after the market closed, granted Treasury 10-year warrants to purchase 110 million shares of Wells’ common stock at an initial price of $34.01 per share. That’s above Wells’ closing price today, $32.11, but below its Tuesday close, $34.46. Wells has about 3.3 billion shares outstanding, according to Yahoo.
Here’s more from Wells:
Wells Fargo was among the first nine large financial institutions to participate in the Treasury Department’s capital purchase program. “We believe the Treasury’s plan is a positive step toward providing much needed capital for financial institutions in the best position to deploy it effectively to stimulate the U.S. economy and strengthen confidence in the U.S. banking system,” Chief Financial Officer Howard Atkins said. “The strength of our franchise, earnings and balance sheet positions us well to continue lending across all sectors and satisfying all of our customers’ financial needs, which is in the spirit of the Treasury’s plan.” As of September 30, 2008, prior to this new capital investment, Wells Fargo’s Tier 1 regulatory capital ratio was 8.5 percent, one of the strongest among large bank holding companies.
Read the full release HERE.
Banks are individually announcing what they got. I would guess the other eight large financial companies also got $25 billion and had to give up a right to buy a chunk of their common stock.
So far the only Orange County bank I know of that got money is Westminster-based Siagon National Bank, which got $1.2 million.
Some experts say weak lenders, such as Downey Financial of Newport Beach, are not getting capital. Bloomberg has a story on that HERE.
And in other mortgage news…
Posted in: Company Watch • Meltdown • Wachovia • Wells Fargo | 4 Comments »
October 3rd, 2008, 7:45 am by Mathew Padilla
(Update: Citigroup wants merger halted.)
Wachovia today said it is being acquired by rival Wells Fargo in a $15-billion all-stock deal that trumps a competing offer by Citigroup and doesn’t involve the government.
On Monday, the Federal Deposit Insurance Corporation had said Citigroup was buying Wachovia’s banking operations and that the FDIC might absorb some losses on Wachovia’s $312 billion pool of loans.
Citigroup today demanded Wachovia stop the merger with Wells, saying Wachovia breached an exclusive deal reached with Citigroup earlier this week, reports Bloomberg. Read that story HERE.
Here’s some facts on the Wachovia-Wells deal and where to find more info:
- Robert Steel, CEO of Wachovia Corp., said in a release, “This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support. The market presence and composition of our businesses, along with our service-oriented cultures, are extraordinarily complementary and this combination creates great potential for sustained stability and growth.” To read the full release, CLICK HERE.
- Wachovia has branches in nine cities and towns in Orange County. See the full list HERE. Wells Fargo has many more locations in the county. Look up a branch HERE.
- Wachovia shareholders will get 0.1991 shares of Wells Fargo for every share of Wachovia stock they own, valuing Wachovia at about $7 per share. That is a nearly an 80 percent premium over the stock’s Thursday closing price of $3.91. The Associated Press has more details on the deal HERE.
- Sheila Bair, chairman of the FDIC, gave a brief statement saying her agency would still stand behind the Citigroup deal if necessary: “Since the close of our bidding process, Wells has apparently re-assessed its position and come forth with this new offer that does not require FDIC assistance. …The FDIC stands behind its previously announced agreement with Citigroup. The FDIC will be reviewing all proposals and working with the primary regulators of all three institutions to pursue a resolution that serves the public interest.” Read the full statement HERE.
- How does this deal compare to Citigroup’s offer? Read more about that previous deal HERE.
And in more meltdown coverage…
Posted in: Company Watch • Wachovia • Wells Fargo | 3 Comments »
September 29th, 2008, 6:42 am by Mathew Padilla
Citigroup is buying the banking operations of struggling Wachovia Corp., in a deal facilitated by federal regulators and one that protects all consumer deposits, the Federal Deposit Insurance Corp. announced today.
Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans, with the FDIC covering any remaining losses. In exchange, the FDIC gets $12 billion in preferred stock and warrants.
Unlike Washington Mutual last week, the FDIC says Wachovia didn’t actually fail and that deposits are safe.
Wachovia is keeping AG Edwards and Evergreen. Here are some other facts and sources of information on the deal, the latest in the ongoing financial meltdown:
- Wachovia has at least nine locations in Orange County. See the full list HERE.
- FDIC Chairman Sheila Bair said in a release, “For Wachovia customers, today’s action will ensure seamless continuity of service from their bank and full protection for all of their deposits. There will be no interruption in services and bank customers should expect business as usual.” Read the full FDIC release HERE.
- The Associated Press has a good story on the deal HERE.
By the way, Citigroup previously tried to make a go at subprime lending by buying last year the wholesale (Argent Mortgage) and loan servicing businesses of subprime king Roland Arnall, who died earlier this year. In May, Citigroup said it was closing all that down or integrating it, cutting nearly 2,000 jobs (about 400 local ones) and shutting offices in Orange and Irvine.
And here’s more meltdown coverage…
And other mortgage topics…
Posted in: Citigroup • Company Watch • Credit Crunch • Meltdown • Wachovia | 10 Comments »
August 7th, 2008, 12:01 am by Mathew Padilla
Wachovia, one of the largest financial firms in America, estimates some Orange County homes will drop 20% more in value, after already losing 12%.
Wachovia didn’t give an exact time line. The company, during its July 22 earnings presentation, estimated losses on loans that allow borrowers to choose their monthly payment, including one that means owing more to the bank. Having been burned, it no longer makes that loan.
It looked at how much home prices are likely to drop amid homes with such loans. Then it estimated probable losses on the loans.
The company predicts Orange County will be the fourth highest area in the nation for losses on such loans held by Wachovia. It expects to lose $546 million, or 9 percent of about $6.37 billion in its option ARM loans in the O.C.
The three Metropolitan Statistical Areas that could cost Wachovia more money are:
- Riverside at $1.34 billion
- Los Angeles at $1.28 billion
In all, Wachovia expects to lose $13 billion, or 11 percent of its $122 billion in such loans nationwide. To view the full presentation, CLICK HERE.
Another interesting stat on Wachovia’s option ARM loans in Orange County: on average they originally equated to 69 percent of the value of the homes backing them. That figure has risen to 84 percent, based on computer modeling of home values in the area. By the time the market bottoms, Wachovia estimates that will total 104 percent.
And in related topics….
Posted in: Company Watch • Wachovia • housing prices • Wachovia | 33 Comments »
July 22nd, 2008, 8:45 am by Mathew Padilla
(Update: job losses breakdown.)
The day after Wachovia said it would no longer accept loans from mortgage brokers, the company today reported a second-quarter loss of $8.9 billion and said it’s cutting jobs and its dividend. That compares to a profit of $2.3 billion a year ago.
Setting aside $5.6 billion for potential losses on bad loans helped ding the company’s earnings. It also had a $6.1 billion noncash charge related to declining asset values and market conditions, the company said.
Lanty Smith, Wachovia’s chairman, said in a release, “These bottom-line results are disappointing and unacceptable. While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility. Our company is facing up to these issues, is addressing the challenges head-on and has redirected near-term strategic priorities”
Wachovia is laying off or eliminating more than 10,000 workers and positions. It’s cutting 6,350 full-time employees, and not filling open positions or letting go of contract workers to the tune of 4,400 spots.
And the Charlotte-based bank is cutting its quarterly dividend to 5 cents per share from 37.5 cents.
Robert Steel, who was named chief executive on July 9, said, “In the short term, the entire organization is focused on protecting, preserving and generating capital; reinforcing Wachovia’s strong liquidity position; and reducing risk.”
Wachovia’s greatest misstep may have been its $24 billion acquisition of Golden West, also known as World Savings, in May 2006, just as the once-hot housing market started to cool. Golden West specialized in loans that allow borrowers to select a monthly payment, including one option that resulted in homeowners owing more to the bank. Wachovia stopped making such loans last month.
And in related news…
Posted in: Company Watch • Wachovia | 2 Comments »
July 21st, 2008, 3:50 pm by Mathew Padilla
Wachovia will stop funding loans via mortgage brokers after Friday, July 25, as it continues to respond to a “challenging market environment,” company spokesman Don Vecchiarello said.
“We will still continue to sell mortgages via Wachovia-branded retail sales staff, over the phone, via the Internet and direct mail,” he said. “We believe it is important to focus on serving the needs of customers that have a relationship with the bank.”
The company, which reports earnings tomorrow, did not release a statement on the move, which was first mentioned on the Implode-o-Meter Web site this morning.
Vecchiarello declined to comment on how many wholesale employees will be let go, or if there are any layoffs in Orange County.
This latest change in its lending model follows Wachovia’s elimination last month of loans that allow borrowers to select a monthly payment, including one option that resulted in homeowners owing more to the bank. Dropping the payment-option loan raised eyebrows, since it was the bread-and-butter of Golden West, a company Wachovia paid $24 billion to acquire in May 2006.
By the way, check out a previous post from Jon Lansner: Wachovia CEO sees ’soft housing’ well into ‘08.
And in other news:
Posted in: Broker Corner • Company Watch • Wachovia | 12 Comments »
December 11th, 2007, 12:00 am by Jon Lansner
North Carolina’s Wachovia just plastered its name all over O.C. (and California) as a culmination of its purchase last year of giant California S&L, Golden West’s World Savings. Timing wasn’t so good, as the home-loan market has since tanked. Here’s what Wachovia execs told Morgan, Keegan analyst Bob Patten about Golden West, California and the mortgage market during a recent conference call with Wall Street analysts …
WACHOVIA CFO TOM WURTZ: What I can tell you, Bob, from a top of the house perspective in terms of net income contribution of Golden West, net income is materially higher in 2007 than it was in 2006. I would have a fair amount of optimism or great amount of optimism that we will see growth in 2008, as well. We’re seeing balanced growth, margins are wider, and to this point, actual credit losses have been extraordinarily low, and we’ve achieved all the expense cuts plus probably a little bit more as we’ve integrated mortgage businesses. So to be honest with you, it didn’t hit the numbers we thought back in 2006 or 2007, but it’s clearly growing and will continue to grow at a nice healthy pace.
PATTEN: Okay, and then just one last question. Don, in terms of where we are in this housing cycle, obviously, it’s accelerating, obviously, we’re a little surprised with the rate of deterioration and provisions across the group. Where do you think we are in terms of percentage? Are we halfway there, a quarter of the way there? Is through ‘09? What’s your thoughts?
DON TRUSLOW, WACHOVIA’S CHIEF RISK OFFICER: Gosh, Bob, it’s so hard to tell. I don’t know if we’re a third of the way or halfway through, but it’s very evident that the withdrawal of capital that existed for a segment of home buyers out there, call it subprime or lower quality credit has disappeared and that’s forcing a lot of inventory back on the market and is having a widespread effect across the market. I don’t think any of us really connected those dots to understand that broad ripple effect. Of course there are a lot of resets that have been in the press being talked about coming up as we head into 2008 and what impact that has and further inventory coming back on the market. I think we’re just going to have to watch. On the positive side, it’s kind of good and bad, but the housing start numbers the other day were low and as you would hope, maybe that’s a signal that new inventory from construction is slowing down and hopefully will help us work through the kind of inventory overhang out there, maybe a little more quickly.
WACHOVIA CEO: KEN THOMPSON: I think it’s, personally I think we’re looking at a very soft housing environment well into 2008 if not all the way through 2008.
To read more, CLICK HERE
Posted in: Wachovia | 2 Comments »
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