Wachovia Corp. said Friday it would take after- tax charges of $205 million in the fourth quarter, about double analysts' expectations.
The charges, stemming from higher-than-expected merger costs, technology spending, and losses on sales of investment securities, will effectively wipe out most of the quarter's profits.
Consensus estimates had projected Wachovia would earn $1.03, but the charges amount to $1.01 per diluted share.
"This is larger than what was anticipated," said Darren R. Short, an analyst at Robinson-Humphrey Co.
The largest chunk of the charge is $232 million pretax for expenses associated with the integration of three mergers. This charge came in greater than projected because 350 more employees than expected are taking severance packages, said Wachovia chief financial officer Robert McCoy.
Anthony Davis, an analyst at Dillon, Read Inc., said the merger-related expenses are consistent with what many consolidating banking companies are experiencing. "Their idea is, 'Let's just put this behind us and get on with it,'" he said.
The company is also taking a $67 million pretax charge for the disposal of personal computer hardware and software in conjunction with its plan to adopt a companywide distributed technology platform. This was unexpected, Mr. McCoy acknowledged.
Finally, Wachovia is taking $4 million in pretax losses on available- for-sale investment securities. Additional pretax merger expenses of $50 million will be recognized in 1998, officials said.
Wachovia shares fell faster than bank stocks at large Friday, closing at $80.875, down $1.4375.
- Carey Gillam