US bank Wachovia scorched with US$8.7bn loss

NEW YORK, July 22, 2008 (AFP) – Banking giant Wachovia took a hit from the US housing slump with a quarterly loss announced Tuesday of 8.662 billion dollars but its shares surged as it unveiled job cut and other steps to shore up its finances. The loss amounted to 4.20 dollars per share, far above the average Wall Street forecast of a loss of 78 cents per share.

Wachovia also announced it would cut 5,350 jobs by the end of 2009 as it restructures in the face of a difficult environment, and a sharp cut in its dividend.

Shares in Wachovia opened with heavy losses but rebounded sharply amid expectations that the banking giant would be taking moves to restore profitability.

Wachovia shares soared 27 percent to end at 16.79 dollars, leading the beleaguered banking sector higher.

“Perhaps the market is enthused about Wachovia’s cost-cutting plans … or, maybe investors are cheered by the Zen-like approach of CEO Robert Steel,” said Elizabeth Harrow at Schaeffer’s Investment Research.

Credit firm Standard & Poor’s downgraded its rating on Wachovia but said the outlook is now stable. It said the bank was hurt by its acquisition of mortgage firm Golden West but is now taking steps to bolster its finances.

“The one-and-a-