Wachovia declares $1.1 billion writedown for October

Wachovia has announced $1.1 billion in writedowns for the month of October, as the bank’s holdings in collateralised debt obligations (CDOs) and mortgage-backed securities (MBS) continue to lose value.

In a filing to the Securities and Exchange Commission (SEC), America’s fourth-largest bank by assets declared that, in addition to last month’s report of third-quarter market disruption-related losses totalling $1.3 billion, the firm has had to write off almost the same amount again, due to the depreciation of CDOs and MBS exposed to subprime mortgages.

The writedown meant Wachovia had just $676 million of exposures to CDOs and MBS left on its balance sheet by October 31, a massive drop from the $1.8 billion value it placed on the same structured products just a month earlier.

The October figures presage what looks likely to be another painful quarter for institutions stuck with depreciating securities they cannot find buyers for. “Wachovia now expects to record a loan loss provision in the fourth quarter of 2007 of between $500 million and $600 million,” the SEC filing read.

Wachovia joins Citi, Morgan Stanley, Merrill Lynch and several other banks that have come forward in recent weeks with writedowns much worse than those detailed in their third-quarter reports.

Regulatory investigations into the crisis are under way, with the International Organisation of Securities Commissions setting up a task force to identify lessons to be learnt from the crisis, and the SEC investigating Merrill Lynch, which yesterday confessed a further $5.7 billion exposure to subprime markets.

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