Wachovia board forces CEO out - East Valley Tribune: Business

Wachovia board forces CEO out

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Posted: Monday, June 2, 2008 10:09 pm | Updated: 9:59 pm, Fri Oct 7, 2011.

CHARLOTTE, N.C. • Less than a month after losing his chairman post, and more than two years after an ill-timed acquisition of California mortgage lender Golden West Financial Corp., Wachovia Corp. said Monday that board members have forced CEO Ken Thompson to retire from the nation’s fourth-largest bank.

The board of the Charlotte-based bank said it asked Thompson to leave a few days ago, and acted Sunday to replace him on an interim basis with Chairman Lanty Smith. Smith replaced Thompson as chairman last month in a move the bank said “strengthens independent leadership” at the company.

But several analysts on Monday questioned if Thompson’s ouster means more problems at Wachovia, a bank that has weathered a series of setbacks, including mounting losses and federal investigations, in recent months. They also speculated that Wachovia could be a takeover candidate, though the bank said Monday that it plans to remain independent.

“Golden West doesn’t help,” said Nancy Bush, an independent analyst with NAB Research LLC in Aiken, S.C. “Makes you wonder if there’s more trouble or change ahead.”

The high-priced deal gave Wachovia a means to expand aggressively into the booming home-lending business while adding hundreds of branches on the West Coast. It also exposed the bank to collapsed housing markets and has led to billions in loan losses that continue to build.

Shares of the bank’s stock have fallen 58 percent in the past year. Wachovia shares lost 40 cents, or 1.7 percent, to close at $23.40 after trading to a near 13-year low of $22.72 earlier in the day.

Thompson, 57, is the latest financial services executive to be ousted amid turmoil in the U.S. housing market.

He joins Stanley O’Neal at Merrill Lynch & Co. and Charles Prince at Citigroup Inc., who both presided over huge losses from exposure to bad mortgages, and were subsequently forced out from their perches at the top of Wall Street institutions.

Also Monday, Seattle-based Washington Mutual Inc. stripped Kerry Killinger of his chairman title, though he remains CEO at the nation’s largest savings and loan.

“We will likely see more changes in top brass at institutions hit particularly hard by the subprime mortgage crisis,” said Eva Weber, an analyst with Aite Group, a Boston-based financial services research firm. “As more losses are incurred, and boards of directors scrutinize decisions around mortgages, we will likely see shifts in management.”

U.S. bank shares were also under pressure after a broad descent Monday in the European banking sector as well as ratings cuts in the U.S.

Deutsche Bank analyst Mike Mayo warned Wachovia investors to guard against negative surprises, particularly when the bank reports its second-quarter earnings next month.

“We continue to have a downward bias to our estimates and this move only heightens concerns about earnings and asset quality problems short-term,” Mayo wrote in a note to clients on Monday.

On a conference call with reporters, Smith would not provide an outlook for second-quarter earnings, but he said Wachovia would continue to be affected by loan losses, like its competitors.

Thompson joined predecessor First Union Corp. in 1976 after business school and quickly moved up the company’s ranks under then-CEO Ed Crutchfield. In 2000, Thompson was appointed chief executive, and won praise for the successful merger with Wachovia in 2001.

Thompson’s dismissal comes after several months of criticism from shareholders.

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