Wachovia loses $23.9 billion in Q3

Wachovia reported a third quarter loss of $23.9 billion, blaming an $18.8 billion goodwill impairment charge, declining market valuations and its acquisition by Wells Fargo.

“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 for that and other sub-segments,” chief financial officer David Zwiener said during a conference call on Wednesday.

Wachovia posted a $1.6 billion profit in the same period last year.

The $18.8 billion loss largely stemmed from the retail and small business, commercial, wealth and asset management areas of Wells Fargo.

Wells Fargo confirmed on October 9 that it would proceed with the merger with Wachovia. This announcement came after a tussle with Citigroup who also bid to acquire the bank.

The bank also saw a $6.6 billion credit loss provisions, including $3.4 billion to build reserves to cover losses from its Pick-a-Pay mortgage portfolio. Wachovia’s Pick-a-Pay mortgage plan gained notoriety as the program allowed borrowers the freedom to name their payment; this led to some homeowners paying so little that their loan balances increased over the term of the mortgage.

The bank also dedicated $1.4 billion to boost its loan loss reserves.

Results were also impacted by costs relating to the banks auction rate securities settlement. On August 15, Wachovia agreed to buy back $8.5 billion of these securities. Initially billed as a cash equivalent, these auctions failed in February 2008 as they failed to provide adequate liquidity to investors.

See also: JP Morgan and Wells Fargo profits tumble in Q3
Citi pulls out of Wachovia deal
Citigroup to acquire Wachovia

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