Wachovia Corp. on Wednesday gave investors a chance to see many of the numbers that Wells Fargo & Co. and Citigroup Inc. had pored over late last month, as they debated how much to pay for the teetering banking company.
And it wasn't pretty.
Wachovia clearly used the third quarter to clean house before its upcoming sale to Wells Fargo. The Charlotte company reported a net loss of $23.9 billion, or $11.18 a share, that included an $18.8 billion goodwill impairment charge tied to virtually all its businesses, declining market valuations and the terms of the Wells' sale.
The quarter also included a $6.6 billion loan-loss provision, with more than half dedicated to its pick-a-pay mortgage portfolio, $2.5 billion in market disruption losses, $682 million in valuation declines from principal investing, $515 million in severance, $497 million from settling auction-rate securities issues, and $397 million from planned securities losses.
It was Wachovia's third straight quarterly loss. It compared to a $9.1 billion loss in the second quarter and a $1.6 billion gain a year earlier.
Wells, however, said it was pleased with the aggressive moves. "We believe that it was prudent for Wachovia to put these losses behind them," Howard Atkins, the San Francisco company's chief financial officer, said in Wachovia's press release.
"The asset writedowns, reserve build, and other items are consistent with our acquisition assumptions. The goodwill impairment will have no impact on tangible capital or our planned capital raise," he added.
Wells is set to close its deal for Wachovia in December.
To put the provision in perspective, it was 19.1% higher than the one recorded in the second quarter and 16 times greater than a year earlier. Nonperforming assets rose 26.1% from the second quarter and fivefold from a year earlier, to $15 billion. Consumer NPAs rose 22.3% from a quarter earlier, to $9.3 billion, while souring commercial loans were up 20.6%, to $4.1 billion.
The results also detailed just how severe the deposit bleeding was at Wachovia. At Sept. 30, deposits were down 6.5% from the second quarter and 0.7% from a year earlier, to $418.8 billion. (The period-end number was off 6.3% from the average deposits for the third quarter.)
The runoff in deposits outpaced efforts to shrink the loan book, which decreased 1.2% from the second quarter but grew 7.4% from a year earlier, to $482.4 billion. Slight growth in commercial lending partially offset a 3% drop in consumer lending from a quarter earlier.
Revenue fell 22.7% from the second quarter and a year earlier, to $5.8 billion.