Wachovia risk officer says housing downturn far from over

By IEVA M. AUGSTUMS
AP Business Writer
Published: March 12, 2008

CHARLOTTE, N.C. - Wachovia Corp., which continues to defend its $24 billion purchase of a California mortgage lender, says the downturn in the nation’s housing market is nowhere near over.

Speaking to analysts on a Deutsche Bank Securities Inc. conference call, Don Truslow said Wednesday that “it feels like we have a ways to go.”

Using a baseball analogy, Truslow said he didn’t know if the downturn was in the third, fourth or fifth inning. He added “we’re still before the seventh inning stretch.”

And if the economy gets worse, “we could find ourselves right now in very early innings of the credit cycle,” Truslow said.

Wachovia shares fell 14 cents, or nearly half a percent, to $29.62 in afternoon trading Wednesday. They are closer to the low end of their 52-week range of $25.98 to $57.45.

The Charlotte-based bank, and well as many others, has found itself on shaky ground in the middle of a credit crunch.

Last month, Wachovia said it expects to set aside more money for bad loans.

The bank took more than $3.2 billion write-downs in the second half of 2007 because of the falling value of certain complex investments, as a housing slump and weakening credit markets ensued. Those investments included collateralized debt obligations, a complex security often backed by subprime mortgage loans — or those given to customers with poor credit histories.

Citing “rapidly changing conditions in the housing markets,” the bank said in its annual report that its expense for bad loans will likely be more than .75 percent of average net loans in the first half of the year. It had previously estimated an expense below this level.

Chief executive Ken Thompson has faced scrutiny for expanding his company in the mortgage business at the peak of the housing market. In 2006, he acquired California-based mortgage specialist Golden West Financial Corp. for $24 billion.