The Wachovia Corp. plans a series of actions designed to enhance its capital base and operational flexibility, and has updated its credit reserve modeling to reflect greater emphasis on forecasted changes in customer behavior assuming continued house price depreciation.
The company says it will raise capital through a public offering of common stock and perpetual convertible preferred stock, as well as lower its quarterly common stock dividend to build capital ratios and provide more operational flexibility.
In addition, Wachovia reported a first-quarter 2008 net loss of $350 million before preferred dividends, or a net loss available to common stockholders of $393 million, ($0.20 per common share). These results, which reflect higher credit costs and the continued disruption in the capital markets, compared with earnings of $2.30 billion, or $1.20 per share, in the first quarter of 2007.
‘I'm deeply disappointed with our first-quarter results, but I am confident we are taking prudent and appropriate actions in this challenging period to restore Wachovia to a more profitable path,’ says Ken Thompson, CEO at Wachovia. ‘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.’