Wachovia Needs Another Transfusion

Wachovia joins the list of chronic anemics along with Citigroup (C), Washington Mutual (WM), Merrill Lynch (MER) and Countrywide Financial (CFC).

The Wall Street Journal is reporting Wachovia to get $8bn capital infusion.

WACHOVIA Corp, the fifth-largest US bank in stock-market value, is today expected to announce that it will get a capital infusion of several billion dollars from external investors.

Wachovia is expected to get $US6 billion to $US7 billion (up to $7.6 billion) from selling its shares to the investors for roughly $US23-24 apiece, according to people familiar with the matter. That price represents a discount of more than 15 per cent to Wachovia's share price on Friday.

Wachovia, led by chairman and chief executive G. Kennedy Thompson, is structuring its capital infusion in a similar fashion to that employed by Washington Mutual last week, when it raised roughly $US7 billion from buyout firm TPG. Instead of going to shareholders exclusively, banks and Wall Street firms are looking for a third-party vote of confidence, a role that sovereign wealth funds and private equity groups have been eager to play.

Patient Is Ill

Wachovia is clearly ill and in need of another lifesaving transfusion. Vital signs are poor with multiple relapses.




click on chart for sharper image

Without another transfusion, this could be terminal.

Merrill Lynch Reported To Be Recovering

Merrill Lynch, another chronic anemic insists its blood count is fine. The International Herald Tribune is reporting Merrill doesn't plan to raise more capital.

April 8, 2008
The U.S. investment bank Merrill Lynch does not plan to raise more capital and will continue to shrink its balance sheet amid the global credit crunch, Chief Executive John Thain said Tuesday.

"We deliberately raised more capital than we lost last year," Thain said at a media briefing in Tokyo. "We believe that will allow us to not have to go back to the equity market in the foreseeable future."

Merrill has so far written down $24 billion worth of investments related to the troubled U.S. mortgage market. Merrill has raised about $12.8 billion of capital since late 2007, following heavy subprime losses in the third and fourth quarters.

The bank has also looked beyond the United States for its funding, raising $6.6 billion from a group including Japanese, South Korean and Kuwaiti investors.

Merrill Lynch thinks it is fine. However, Wachovia thought it was fine in January and February. By April, Wachovia was looking very anemic.

Last week WaMu Raised Cash, Skeptical Eyebrows in a life saving transfusion. I am willing to bet still more transfusions will be needed for Citigroup, WaMu, Merrill Lynch, Wachovia, and others. The bottom is not in.

Comments

[WAKEUP]

Wachovia...It couldn't happen to a better-deserved bunch of people. They aren't referred to on the street as "WALKOVERYA,"... for nothing. Maybe they'll have to walk under a bridge to find a place to do business, after they fail.