Wachovia Corp (WB) Admits Further Subprime Writedowns
It’s earnings time again, and once again subprime writedowns are wreaking havoc amongst financial sector companies on the stock market. The latest losses are being reported by Wachovia Corp (WB), which this morning announced that it will try to raise $7 billion in capital. This comes as Wachovia reports a $350 million loss this past quarter.
Many of the losses come as foreclosures mount in the US mortgage market. In many cases, securities that companies have invested in were backed by subprime loans. These mortgage back securities then fall in value as defaults and foreclosures ensue.
Wachovia is the fourth-largest bank in the United States, and had some investments in securities that included subprime loans. These relatively illiquid securities are causing all sorts of problems as analysts and fund managers try to figure out how much they are worth.
In the meantime, Wachovia has increased the amount it is setting aside to cover losses, reports BBC News:
Wachovia has set aside $2.8bn to cover current and future losses stemming from the housing and credit crises, the bulk of these arising from loans which will not be repaid.
The largest bank by far to express problems due to subprime writedowns is UBS, which is suffering a $37.4 billion loss. Other banks having problems include Citigroup ($21.1 billion) and Merrill Lynch ($22 billion). HSBC has also lost a significant amount to this crisis — $17.2 billion. Other companies’ losses remain somewhat limited, although even relatively small amounts lost, like Bear Stearns’ $3.2 billion, can have a big impact.
While there is some optimism that the credit crunch and the subprime lending crisis are coming to an end, it remains to be seen what further losses are seen, and which financial sector companies manage to recover.
Tags: Wachovia, WB, home mortgage loan, mortgage loan blog,
subprime writedowns, credit market crisis, mortgage lenders
