Earnings Preview: Wachovia Bank

Wachovia (WB) is expected to report Q2 earnings before market open on Tuesday, July 22 with a conference call scheduled for 10:00 am ET.

Guidance

Analysts are looking for revenue of $8.37B. The consensus range for revenue is $7.41B to $9.07B, according to First Call.

Analyst Views

Wachovia on July 10 preannounced that it would report Q2 EPS of ($1.23) to ($1.33). The bank said the loss was caused by higher provision expenses, including a $4.2B pre-tax increase in loan loss reserves. The bank forecast that its Tier One capital ratio would be about 8%. On July 9, Wachovia announced that it had chosen former Goldman Sachs (GS) Vice Chairman Robert Steel as its new CEO, effective immediately.

Ladenburg Thalmann responded to both news items by lowering their target for the bank to $17 from $19, and maintaining their Neutral rating. The firm slashed their 2008 EPS estimate to (23c) from 89c, but they added that Steel's hiring would prolong speculation that Goldman Sachs would attempt to buy Wachovia. Oppenheimer on July 15 downgraded Wachovia to Underperform from Market Perform, as the firm does not think the bank can slash its costs quickly enough to prevent earnings erosion.

Agents representing several state governments visited Wachovia Securities' St. Louis headquarters on July 17 as part of a probe into auction rate securities.