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Tuesday, September 02, 2008


Wachovia to Cut Phoenix Jobs

In an effort to regain losses, Wachovia will cut thousands of Phoenix jobs.

In July, Wachovia Corp. announced it had a second quarter loss of $8.9 billion and would cut 10,750 jobs. The company launched an expense initiative in June, and plans to cut many Phoenix jobs. Overall, Wachovia will eliminate 6,350 active positions and 4,400 open positions and contractors. About 40 percent of the $1.5 billion the company hopes to cut by 2009 will come from personnel cuts, according to an article by the Phoenix Business Journal.

The majority of cuts are expected to come from the company's mortgage business, as 4,400 mortgage employees will lose their jobs over the next year and the company will no longer offer home loans through brokers. As of June the company had eliminated 2,000 mortgage jobs.

While some had expected Wachovia would raise capital to account for rising mortgage costs, it is now expected the company will cut dividends and reduce expenses. The company recently raised $8 billion by selling common and preferred stock, but does not plan to sell more stock to make up for losses.

"The net loss of $4.20 per share includes a $6.1 billion non-cash goodwill impairment charge reflecting declining market valuations and asset values," the article notes. "The goodwill impairment charge has no impact on Wachovia's tangible capital levels, regulatory capital ratios or liquidity."

In the second quarter of 2007, the company earned $2.3 billion, or $1.22 per share. In the second quarter of this year, Wachovia added $5.6 billion to its loan-loss reserve, increasing the reserve by $4.2 billion. However, income interest decreased from $4.5 billion in July 2007 to $4.3 billion. Non-interest income decreased to about $3.2 billion from $4.2 billion last year.

"Immediate changes at the bank include cutting the quarterly common stock dividend to 5 cents per share, which will conserve about $700 million of capital per quarter," the article adds. "In May, the company had cut its dividend to 37.5 cents per share from 64 cents.

"Earlier the company ceased offering its 'pick-a-payment' mortgage product that it acquired with its purchase of Golden West Financial Corp.," the article continues. "The bank discontinued the minimum-payment option on all new loans, a process that allowed a borrower to make payments lower than the interest due on the loan. By not covering the total interest due, the borrower's monthly payments and loan balance can increase over time."

Wachovia also plans to shift 1,000 mortgage-origination personnel in order to help customers refinance and restructure pick-a-payment mortgages, in turn assisting customers in avoiding foreclosures and reducing the company's risks in the mortgage area.


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