Wachovia Names New CEO, Warns of Large Loss for Second Quarter

Consumer banking giant Wachovia Corp. (NYSE: WB) has named a new CEO after the ouster of Ken Thompson last month (“WaMu, Wachovia Make Changes at the Top,” June 2).

Robert Steel, most recently Under Secretary for Domestic Finance for the U.S. Department of Treasury, Wednesday was named CEO of the fourth largest bank in the U.S. Not a traditional banking leader, Steel spent most of his career at Goldman Sachs working in capital markets. Steel is also credited with engineering JPMorgan Chase’s recent buyout of troubled broker Bear Stearns.

Some analysts speculated that the primary motivation in naming Steel to the top spot was to prepare Wachovia for a takeover. Gary Townsend, a partner with Hill-Townsend Capital, told the Atlanta Business Chronicle that Steel’s lack of experience in retail and commercial banking was a negative and that he thought Steel might have been brought in to prep the company for a sale.

The Charlotte, N.C.-based bank said last month that it had hired Goldman Sachs to evaluate strategic alternatives for its loan portfolio (“Wachovia Hires Goldman Sachs for Loan Portfolio Advice,” June 24). At the time, rumors swirled that JPMorgan might be interested in acquiring Wachovia.

Wachovia also said Wednesday that it expects an after-tax loss of $2.6 to $2.8 billion for the second quarter. The bank said that it set aside some $4.2 billion for loan losses in the quarter, primarily related to its Pick-A-Pay mortgage product, which is has discontinued. Charge-offs for the quarter were approximately $1.3 billion.

Wachovia expects to report results for the second quarter on July 22.