Wachovia CFO to Step Down
The parade of senior executives leaving their posts -- or being forced to leave -- continued Friday, with Wachovia Corp. (WB) annoucing late Thursday that CFO Thomas Wurtz has made plans to exit as soon as the company can locate a replacement. Wachovia said in a press statement that it "will begin an immediate search for a replacement." On Tuesday, Wachovia reported a second quarter loss of $8.9 billion, or $4.20 per share, and the elimination of 10,750 jobs. The bank also became the latest to exit the wholesale mortgage origination channel. The record loss included $5.6 billion in credit costs, including a $4.2 billion loss provision covering expected future losses in the bank’s substantial mortgage holdings. Earnings were also affected by a $6.1 billion impairment to goodwill, that, oddly enough, was not tied to the bank’s ill-fated $25 billion purchase of option ARM specialist Golden West Financial in 2006. Wachovia’s problematic option ARM portfolio, also known as a Pick-a-Pay mortgage, actually grew between the first and second quarters, reaching $122.2 billion of the bank’s $488.2 billion in total loans; no other U.S. bank has as much exposure to option ARMs in real-dollar terms. The North Carolina-based bank yanked its option ARM program earlier in the year as mounting losses made the product unprofitable. Disclosure: The author held various put option contracts on WB when this story was published; indirect holdings may exist, however, via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.