Wachovia revises losses due to sales probe

Wachovia Corp increased its previously reported second-quarter loss to $9.11 billion (Dh33.4bn) to cover costs to settle a probe of auction-rate securities sales, and said it will cut more jobs as the housing market deteriorates.

The fourth-largest US bank is now reporting a loss of $4.31 per share, up from the $8.86 billion, or $4.20 a share, it reported on July 22, according to its quarterly report filed on Monday with the US Securities and Exchange Commission.

Wachovia also now plans to cut 6,950 jobs, 600 more than it had disclosed, with the additional cuts coming from mortgage operations, spokeswoman Christy Phillips-Brown said.

The cuts affect about 5.8 per cent of Wachovia’s 120,000-person workforce. Wachovia is also eliminating 4,400 open positions.

Separately, Wachovia said the SEC may recommend civil charges against its main banking unit in connection with municipal derivatives transactions. It also said various state attorneys general have issued subpoenas over that matter. The bank said it was co-operating with the probes. Bank of America Corp reported receiving its own subpoenas last week.

The quarter marks the second in a row when Charlotte, North Carolina-based Wachovia revised results to increase the size of its reported loss. Wachovia increased its first-quarter loss to $708 million from an original $393m because of a write-down tied to life insurance policies.

Auction-rate debt has interest rates that reset through periodic auctions. Once thought safe, much of the market has been frozen since brokerages in February stopped supporting the debt.

Wachovia said it added $500m to legal reserves to cover a possible settlement. It is in talks with regulators to resolve matters related to auction-rate debt, after regulatory settlements last week by Citigroup and UBS.

CEO Robert Steel, a former US Treasury Department official, is trying to cut $2bn of expenses by the end of 2009.