Wachovia foresees charge as high as $1B

Wachovia Corp. expects to incur a second-quarter charge of $800 million to $1 billion stemming from a federal appeals court ruling related to the tax treatment of leveraged lease transactions.

Wachovia says the anticipated charge is based on its analysis of Tuesday's court ruling in BB&T Corp. v. the United States.

In light of the ruling, Charlotte-based Wachovia says accounting standards will require the bank to update its assessment of transactions it entered into between 1999 and 2003 on lease-to-service contracts and leases of qualified technological equipment.

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Such contracts are known as sale-in, lease-out -- or SILO -- agreements.

Wachovia says it stopped originating such transactions in 2003.

This month, Wachovia reported a first-quarter net loss of $393 million, or 20 cents per share. In the same period last year, the company earned $2.3 billion, or $1.20 per share.

The latest results include writedowns of $2 billion related to the ongoing credit crisis.

Wachovia also set aside $2.8 billion in the first quarter to cover problem loans. The provision largely reflects severe deterioration in the residential housing market, particularly in California and Florida.

The bank also recently cut its dividend to 37.5 cents per share from 64 cents per share while raising $8 billion in new common and preferred stock, which diluted the value of existing shareholders' stock.

Wachovia (NYSE:WB) is one of the nation's largest financial-services companies. As of March 31, the company had assets of of $808.9 billion and market capitalization of $53.8 billion.