Wachovia Bank(WB) Needs to Raise $15 Billion in Capital

According to ClusterStock.com on July 28, Wachovia Bank(WB) may offload WB's securities division, which consists of A.G. Edwards and Evergreen Mutual funds. Other supposed targets for the axe are the bank's Northeast and Texas retail branches. Wachovia's capital management unit could fetch $10 billion to $15 billion, CreditSights Inc. analyst David Hendler said in a July 22 report, based on annualized earnings of about $1 billion.

While Steven Syre, A The Boston Globe's Columnist, on July 29, wrote:

Banks in trouble need to raise money to get out of the jam. First they try to sell more shares of the company. If that fails, they unload assets or business units. Banks that really get desperate will sell anything that isn't nailed to the floor.

A number of banks facing serious problems are said to be considering sales of their money management arms. But most, like Fifth Third Bancorp., KeyCorp, and National City Corp., own relatively small and undistinguished investment arms.

Not so at Wachovia Corp. The troubled banking giant owns Evergreen Investments, the well-known Boston firm that manages $246 billion in mutual funds and other accounts. Wachovia also owns a big retail brokerage operation. Could they be on the block?

This became a serious question last week, when Wachovia reported the worst loss in company history. New chief Bob Steel told analysts he would sell noncore assets to plug the hole. Steel never did say what he considered a core asset, but promised a review would be finished in months.

Wachovia needs to raise some serious money. Even the company estimates it won't be able to collect on about $9 billion worth of adjustable rate mortgages it owns. The brokerage and Evergreen combined might fetch $10 billion to $15 billion, by one estimate.

A Wachovia official told Bloomberg News that the brokerage was off the table. So what about Evergreen?

An Evergreen official declined to comment, but pointed me to Steel's words during his conference call with analysts last week. Sure, he was prepared to chop off and sell noncore assets. But Steel also said: "We're strong and well positioned in so many parts of asset management, it just seems like a great business for us to continue to drive and grow."

I'd call that inconclusive. But the answer will be clear within a few months.

The bank has reported a surprisingly large second-quarter loss as much as $8.86 billion, on July 22, was slashing its dividend and eliminating 10,750 positions after losses tied to mortgages soared.

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