Wachovia posts $350 million Q1 loss, looks to raise $7 billion

The declining housing market and the credit crunch put Wachovia Corp. in the red in the first quarter. And now the company will cut more jobs, reduce its dividend and raise $7 billion through a share sale.

The Charlotte, N.C.-based bank recorded a net loss of $350 million and a loss per share of 20 cents, compared with net income of $2.3 billion and earnings of $1.20 a share in the first quarter of 2007. First-quarter revenue dropped nearly 5 percent to $7.9 billion.

The results for the first quarter of 2008 include writedowns of $2 billion related to the ongoing credit crisis.

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The bank had $783.6 billion of assets at the end of the first quarter.

"I'm deeply disappointed with our first quarter results, but I am confident we're taking prudent and appropriate actions in this challenging period to restore Wachovia to a more profitable path," said Ken Thompson, Wachovia CEO. "The precipitous decline in housing market conditions and unprecedented changes in consumer behavior prompted us to update our credit reserve modeling and rely less heavily on historical trends to forecast losses. As a result, we have substantially increased our reserves."

Wachovia will set aside $2.83 billion for credit losses, compared with $177 million in the first quarter of 2007.

To save about $2 billion annually, Wachovia also will reduce its quarterly stock dividend 41 percent to 37.5 percent per share.

"The most painful decision was to reduce the dividend because it adversely affects our shareholders," Thompson said. "But we believe the long-term benefit to shareholder value outweighs the disadvantage of the dividend reduction as we fortify our balance sheet against continued instability in the housing and capital markets."

In a conference call, Wachovia told investors it plans to eliminate 500 jobs in the markets and investment banking unit during the second quarter.

Wachovia also wants to raise $7 billion through a stock sale.

Wachovia is the second-largest bank in Northeast Florida, with 22.6 percent of the market and $6.6 billion in local deposits.