Wachovia Resorts to Emergency Fundraising
April 15th, 2008Via: Guardian:
America’s fourth-largest bank, Wachovia, is raising $7bn (£3.52bn) through emergency fundraising as the subprime mortgage crisis in the US continues to reverberate through the banking sector.
Wachovia is raising the funds through public offerings of common and convertible preference stock after incurring a surprise $350m loss in the first quarter of 2008 compared with $2.3bn in profit a year earlier.
The news came today as two of the biggest names in Wall Street – Citigroup and Merrill Lynch – were poised to report huge write-downs because of the continuing credit crisis. Analysts are bracing themselves for total write-downs of $17bn when the two banks report their quarterly results later this week.
At North Carolina-based Wachovia, the loss was caused by a rise in provisions against loans which had turned sour, particularly mortgages hit in the housing downturn. These option adjustable rate mortgages begin with a low interest rate, which is then replaced by a heftier charge.
Wachovia’s chief executive, Ken Thompson, blamed the “precipitous decline in housing market conditions and unprecedented changes in consumer behaviour” for the figures.
