Wachovia Corp., the biggest bank operating in Florida, posted the largest-ever quarterly loss for a bank Wednesday.
The $23.7-billion third-quarter loss dwarfs the roughly $14-billion that Wells Fargo is paying to buy Wachovia. That's nearly the combined market cap value of regional rivals BB&T and Regions Financial. And it includes a goodwill impairment charge of $18.7-billion, coming shortly after the precrisis Wachovia told analysts there would be no such charge.
The loss, which translates to $11.18 per share, follows a $9.11-billion loss in the second quarter.
If so, Wachovia wasn't prepared to listen Wednesday morning. Instead of the typical earnings conference call with analysts, the Charlotte, N.C., bank posted a prerecorded conference call with three top executives, but no avenue for analysts to call in with questions. One reason for its reticence: The Wachovia-Wells Fargo deal was struck after Citigroup initially agreed to a government-backed buyout of Wachovia, and now Citigroup is suing both companies to recover billions in damages.
Goodwill impairment reflects the declining fair-market value of an asset. In this case, it's the difference between what Wachovia paid for certain assets and how Wells Fargo values them. According to Wachovia, about two-thirds of the writedown was connected with its retail and small-business operations, home to the bank's troubled portfolio of adjustable-rate mortgages.
"The unprecedented, almost unimaginable, events of the third quarter and the consideration for our pending merger with Wells Fargo created a scenario that required goodwill impairment," Wachovia chief financial officer David Zwiener said in the prerecorded call.
Wells Fargo president and chief executive John Stumpf said in a statement that Wachovia's results were "very much in line with our expectations. ... We're more encouraged than ever by what we've seen in their franchise, and we're pleased that Wachovia's team continues to focus on serving customers."
The combined company will have total assets of $1.4-trillion and $787-billion in deposits.
Jeff Harrington can be reached at firstname.lastname@example.org or (727) 893-8242.