Wachovia may be going under

I don’t even understand it, CEO Bob Steel said $10 Billion of the $XXX billion is problematic. So Wachovia is digressing on bad news from Wall Street. They have a fundamentally sound company and they are working to solve the issues with those loans.

Transcript from interview on Mad Money with Jim Cramer:

CRAMER: Wachovia has a reputation for good service and has a reputation, and I’m not blowing smoke, I’m looking at the positive growth in this environment. Mr. STEEL: Sure.
CRAMER: Tell people why deposits matter and now Lehman didn’t have deposits, nd AIG may have had deposits, but you have a core asset.
Mr. STEEL: Jim, there’s a distinction that is with a difference between depository institutions and financial institutions that are nondepository institutions. We take deposits. We have $300 billion of deposits to fund approximately $500 billion of loans. These deposits we take very seriously. We have 5,000 different financial services offices where we work with consumers, develop them and basically do our very best to give the best service possible so that–so that people–customers will come in and trust us with their deposits. It’s a critical part of our business model.
CRAMER: Bob, how can we determine–you’ve got a lot of different–what I think we, in retrospect, are kinds of loans we don’t really like, where you don’t have to pay a lot of money that kind of gave your old bank, before you got there, gave people a lot of options. The people who selected options where they don’t have to put up much money at all, are those the loans that are going bad, 40, 50, is it 60 percent of those loans? Is it from 2005 or 2006, are they going? Give us a sense of how many bad loans there really are of the three hundred and sixty some thousand?
Mr. STEEL: Well, let’s look at it this way, Jim. First of all, let’s recognize that Wachovia has a loan portfolio of about $500 billion. A hundred and twenty-five billion are the option adjustable rate mortgages that came from Golden West.
CRAMER: Bob, that’s a lot.
Mr. STEEL: It is. And that’s why we’re focused on it. And as you suggested, we’ve taken it out of the portfolio and have it in a separate position to focus on with the right people and the right tools. We should be the best person at the world at understanding this type of asset and basically doing the very best to extract the value of that can be extracted. Now, so far, things are going well, and we’re also doing what we can to make a group of these loans adjustable for FHA or conforming status. And so we can choose to take write-offs, we can choose to give people relief on principal. We have lots of flexibility to figure out how to do this. If we just owned securities, we would have two choices: hold or sell. We have lots of choices. So, basically, we’re going to spend a lot of time. But let me just focus on the rest of the portfolio.
CRAMER: Sure.
Mr. STEEL: OK? We have $150 billion of consumer loans. Roughly a third are legacy Wachovia mortgages. They’re performing great. They’re to guys like you and me that walk into branches that we know. The second group, Jim, is second lien, where our business is performing better than anybody else’s.
CRAMER: Really?
Mr. STEEL: Yes.
CRAMER: These home equity loans?
Mr. STEEL: Yes. Whether there are people–again, people that came into the branches and know us well. And the last is our auto book, which is performing very well. That’s 90 percent of our consumer loans, which are 150 billion. That leads us to a little over 200 billion of commercial loans.
CRAMER: Right. Now, that’s supposed to be the next leg. Now, when are…
Mr. STEEL: Let me explain to you. OK. We have 40 of that 215 that you should ask me about. Of that 40, 40 is real estate. Of the 40 real estate, 40 billion, 30 billion are income producing, which are doing fine.
CRAMER: OK.
Mr. STEEL: And 10 billion is residential related, and they’re problematic. Of that 10 billion, 5 billion is real estate, raw land, and the rest are condominium types. And those are quite challenging. But think of what I just did. I just walked you through the portfolio. Ten billion out of over 500 billion are the problematic aspects. So if you look at the 150 billion of consumer, if you look at 216 of commercial X, the unattractive real estate, we have a lot of very good loans that are doing well, and we’re going to focus like crazy, as I said, on the $125 billion in Golden West.

well if their front office works anything like their office locations, this figures. They have by far the worst customer service of any company that I have let have my money.

Sorry for all the Niner members of the Wachovia team, hope your jobs stay safe, but man I hate that company

Well, they won a national award, seven years straight, for best customer service. The customer service for any of the biggest banks (or companies in general) will be comparable. Now, if you compare it with a neighborhood bank, then yes it probably is different. However, I have an account with Truliant Credit Union, much smaller than Wachovia, and Truliants service is worse. And no, I do not work for Wachovia.

http://www.wachovia.com/inside/page/0,134_307^1724,00.html

I haven’t been with FU/Wachovia since future bank exploded in their face. I still don’t want to see the bank go under though.

It's not going under. It hit something like $7 recently and rebounded well. Stock is at 10.00 right now. WB is bigger than WAMU and has more assets to weather the storm. It will probably try to merge which wouldn't be as big a deal.

WB is in a much better position than WaMu. For one, WB can still borrow money short term…it might be at 24%, but WaMu could get nothing by having a junk rating.

The bad news, if WB loses $25 billion, they become undercapitalized, and that’s when the FDIC starts the clock for making you merge or putting you out of business. The $120+ billion “Pick a Payment” mortgages could easily lose that much since many stable people in those mortgages have already been shifted to other mortgages, leaving the people who cannot pay at reset. And what happens when the $200 billion commercial loans come due?

Wells Fargo would probably be the best takeover, b/c the HQ is not prepared for a national presence. Like many, it would have and East Coast and a West Coast presence.

But WB needs the Bernanke bailout. Charlotte should be one town supporting it, since WB is the biggest employer in the area.

if it merges with the spanish bank, they will lose all of their business from the government. The government cannot hold its money in a foreign owned bank. That would be a pretty big blow. The best thing for charlotte would be for wachovia to remain independent. The mortgages are the biggest thing holding Wachovia back. Their retail banking continues to show robust growth.

Depends. Even with all of the financial woes, I still think ultimately there will only be a handful of national banks. With that in mind if they can merge/acquire Wells, that could be best for Charlotte down the road. They would boost their west coast presence, addressing the national bank approach. If not, Wachovia could be in position to be bought out down the road, with the headquarters moving from Charlotte.

I’m rather surprised to hear this about Wachovia. When I lived in Charlotte I was a Wachovia customer and then when I moved to California there weren’t any out here. About a year ago all that changed… they made a HUGE push out here and Wachovia came in and bought up all the old Blockbuster’s there were going out of business and built branches everywhere! They had nearly half the city buses in Orange County wrapped with Wachovia ads and really came in the SoCal with the thunder. I would think they stand to gain some market share now that WaMu (Washington Mutual) is the next one to go under. As large as Wachovia was before they have nearly double their market’s geo-population…

[QUOTE=Normmm;345975]Well, they won a national award, seven years straight, for best customer service. The customer service for any of the biggest banks (or companies in general) will be comparable. Now, if you compare it with a neighborhood bank, then yes it probably is different. However, I have an account with Truliant Credit Union, much smaller than Wachovia, and Truliants service is worse. And no, I do not work for Wachovia.

http://www.wachovia.com/inside/page/0,134_307%5E1724,00.html[/QUOTE]

What problems have you had with Truliant?? I have an account with them as well and LOVE them. Of course I dont usually require much customer service either :smile:

With that in mind if they can merge/acquire Wells, that could be best for Charlotte down the road.

Normmm, there is no way in hell WB could acquire or merge Wells Fargo. This is not some tiny bank. It’s Market Cap is north of $120 billion. WB’s is around $20 billion. Wells would outright buy WB if there is a deal. You would deal with a Wells Fargo bank.

[QUOTE=cakewalk5;345990]Normmm, there is no way in hell WB could acquire or merge Wells Fargo. This is not some tiny bank. It’s Market Cap is north of $120 billion. WB’s is around $20 billion. Wells would outright buy WB if there is a deal. You would deal with a Wells Fargo bank.[/QUOTE]

Nah, it’d be a [I]merger of equals[/I]. Kinda like FU and Wachovia was. :biggrin:

Nah, it'd be a [I]merger of equals[/I]. Kinda like FU and Wachovia was. :biggrin:

The two merging would be like Bank of America and Wachovia being “equals.”

Wachovia’s biggest risk is 49orbust. Some people don’t get or even know about FDIC and that results in a run on the bank. Sad such things can happen in 2008.

Wachovia's biggest risk is 49orbust. Some people don't get or even know about FDIC and that results in a run on the bank. Sad such things can happen in 2008.

I would agree, except we know First Union (now disguised as WB) was notorious for taking huge gambles. Golden West might finally be the gamble that leaves WB exposed.

I would agree, except we know First Union (now disguised as WB) was notorious for taking huge gambles. Golden West might finally be the gamble that leaves WB exposed.

Mr. STEEL: And 10 billion is residential related, and they’re problematic. Of that 10 billion, 5 billion is real estate, raw land, and the rest are condominium types. And those are quite challenging. But think of what I just did. I just walked you through the portfolio. Ten billion out of over 500 billion are the problematic aspects. So if you look at the 150 billion of consumer, if you look at 216 of commercial X, the unattractive real estate, we have a lot of very good loans that are doing well, and we’re going to focus like crazy, as I said, on the $125 billion in Golden West.

Mr. STEEL: And 10 billion is residential related, and they're problematic. Of that 10 billion, 5 billion is real estate, raw land, and the rest are condominium types. And those are quite challenging. But think of what I just did. I just walked you through the portfolio. Ten billion out of over 500 billion are the problematic aspects. So if you look at the 150 billion of consumer, if you look at 216 of commercial X, the unattractive real estate, we have a lot of very good loans that are doing well, and we're going to focus like crazy, as I said, on the $125 billion in Golden West.

Right on the money. WB’s legacy loans were ok (with some troubles). Golden West’s portfolio is proving to be a dog.

I guess the hopes of a 49er Football Wachovia Stadium are down the drain!

I guess the hopes of a 49er Football Wachovia Stadium are down the drain!

Maybe they can give the University a Pick-a-payment mortgage for the stadium. :biggrin:

Tentative bailout agreed upon. Watch the WB stock rise sharply tomorrow. Talks of $19-29 per share buyouts are floating around.

HELL ****ING YES http://www.cnn.com/2008/POLITICS/09/28/bailout.deal/index.html

Normmm, there is no way in hell WB could acquire or merge Wells Fargo. This is not some tiny bank. It's Market Cap is north of $120 billion. WB's is around $20 billion. Wells would outright buy WB if there is a deal. You would deal with a Wells Fargo bank.

I’m well aware of the size of Wells Fargo, that’s part of the reason I was saying to build on the national banks theory that a Wells and Wachovia merger would put them right in that mix. I’m with you though. I don’t think it will happen. I was suggesting what would be best for Charlotte. A Wachovia acquisition of Wells would be better for Charlotte than the other way around. The market cap is imposing. But Wachovia’s is a little misleading as they have been trying to clean house with a new CEO. Hopefully with the government bailout and a new CEO agenda, word gets out and their stock recovers, to boast that market cap.

There seems to be bad sentiment towards Wachovia on this board. I don’t know if that’s BoA employee sentiment or not. For the sake of the city of Charlotte I hope Wachovia succeeds. I don’t view it like a sporting event, rooting for one over the other. But I work for neither, so maybe it’s easier for me to do.

As a former Wachovia employee I feel like most employees saw this coming. When I was conducting merger training for Golden West most employees were shocked at the price they were paying for Golden West in comparison to what FU paid for Wachovia. Most of the people I knew in the mortgage department said entering the real estate market in california and florida at that price was a huge mistake.

The attitude of employees at Wachovia is also very poor. Advancement at that company is tied much more to the color of your skin and sexual orientation than it is to performance. The result is MANY unqualified people in leadership positions. The company’s focus on diversity has impacted their ability to operate sound business. I am much happier at LPL Financial where business decisions are actually made on core business facts and strategies.

I hope for the sake of Charlotte that they get their stuff under control. I did buy some WB stock on fri based on the expected bailout announcement this weekend. I expect the stock to rally on monday and I will sell it off and pocket the cash.