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TUESDAY JULY 22
Wachovia: Setting Bar Low – On Purpose? It seems so, if you take seriously the initial reactions of Wachovia’s investors as the Charlotte, N.C., bank reports a second-quarter loss of $4.20 a share under a two-week-old CEO who also favored slashing the dividend by 87%. But could these moves ultimately prove savvy for a bank looking to arduously rebuild itself from a position of weakness? July 2008Wachovia Corp., the U.S. bank that hired Treasury Undersecretary Robert Steel as chief executive officer two weeks ago, reported a record quarterly loss of $8.9 billion and cut the dividend by 87 percent. The stock fell as much as 12 percent in early New York trading. The second-quarter loss of $4.20 a share compared with net income of $2.3 billion, or $1.23, a year earlier, the Charlotte, North Carolina-based company said today in a statement. The loss included a $6.1 billion charge tied to declining asset values. The writedown and second dividend reduction in three months reflect Steel's response to setbacks including the Golden West Financial Corp. acquisition in 2006, which cost former CEO Kennedy Thompson his job after eight years. Wachovia has dropped more than 75 percent in New York Stock Exchange composite trading since it spent $24 billion two years ago to buy Golden West just as house prices were peaking. "This is Steel's chance as the new guy to set the bar low so that he can increase the dividend going forward if their performance improves," said David Dietze, president and chief investment strategist at Point View Financial Services in Summit, New Jersey, which owns Wachovia shares. Steel also said the company is moving to "sell selected non-core assets" and reduce the number of business customers who only use the bank for loans rather than other services. Wachovia shares have declined 65 percent this year, the second- worst performance on the 24-member KBW Bank Index behind National City Corp., Ohio's largest bank.
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