Wachovia Takes Mortgage-Linked Loss

Wachovia Corp., Charlotte, N.C., has reported a net loss available to common stockholders of $393 million ($0.20 per share) for the first quarter, citing the decline in the housing market as one of the reasons and announcing a reduced quarterly dividend. Ken Thompson, Wachovia's chief executive officer, said the company has "substantially increased" its reserves and cut the dividend to $0.375 per share. "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," he said. The company recorded a provision for credit losses of $2.8 billion in the quarter, which it said exceeded net chargeoffs by $2.1 billion. The provision "largely reflected more severe deterioration in the residential housing market, particularly in specific markets in California and Florida, as well as the result of the refinements to the credit reserve model for the payment-option product," Wachovia said. The company's home equity lending was 41% lower than the volume in the first quarter of 2007, "reflecting implementation of tightened credit standards," Wachovia said. The company's exposure to the housing market stems largely from its acquisition of Golden West Financial Corp., a Oakland, Calif.-based thrift, in 2006. Its net loss compared with net earnings of $2.30 billion ($1.20 per share) a year earlier. Wachovia can be found online at http://www.wachovia.com.