Wachovia's Ouster of Thompson May Foretell New Losses, Takeover

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from Bloomberg:



Wachovia's Ouster of Thompson May Foretell New Losses, Takeover

By David Mildenberg and Hugh Son

June 2 (Bloomberg) -- Wachovia Corp. fell to the lowest since July 1995 after the bank ousted Chief Executive Officer Kennedy Thompson, signaling the company may report a second- quarter loss.

Wachovia, the nation's fourth-biggest bank, dropped as much as 4.5 percent in New York trading, adding to a slide that has cost the lender more than half its market value in 12 months. Analysts speculated that the Charlotte, North Carolina-based company will be vulnerable to a takeover or other form of distress sale. Wachovia said today it isn't ``in crisis.''

The bank had already stripped Thompson, 57, of the chairman's role on May 6 after shareholders -- incensed by the biggest quarterly loss since 2000 -- demanded his removal at April's annual meeting. He joins half a dozen CEOs at financial companies including Citigroup Inc. and Merrill Lynch & Co. who lost their jobs to the global credit crunch. Thompson's ouster may foretell a sale of Wachovia or some assets, analysts said.

``We figure since he's leaving there'll be a big loss provision for the second quarter,'' David Hendler, senior analyst at CreditSights Inc., said in an interview. ``They need to present a different picture on the company, which is, `We're in the restructuring mode.' ''

JPMorgan Chase & Co., Wells Fargo & Co., U.S. Bancorp and non-U.S. banks including Banco Santander SA may be looking at purchasing Wachovia, Hendler said. Wachovia's market value is about $50 billion.

The bank dropped 90 cents to $22.90 at 12:37 p.m. in New York Stock Exchange composite trading, bringing this year's decline to about 40 percent. Deutsche Bank AG analyst Mike Mayo said in a research note today that the stock's true value may be more than $40 a share.

CEO Departures

Wachovia Chairman Lanty Smith, 65, was appointed interim CEO, Wachovia said today in a statement that cited ``a series of previously disclosed disappointments and setbacks'' for today's change. A four-member search committee headed by Smith will seek a replacement to deal with fallout from rising mortgage defaults and writedowns tied to subprime home loans. ......(more)

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