Wachovia Corp. reported a surprisingly large second-quarter loss Tuesday, deflating Wall Street’s hopes that the nation’s big banks are weathering the credit crisis well.

The bank said it lost $8.86 billion and is slashing its dividend and eliminating 10,750 positions after losses tied to mortgages soared.

Even excluding one-time items, the results substantially missed analysts’ estimates. The job cuts include 4,400 contractors and open positions, and 6,350 employees. Most of the cuts will take place in its mortgage operation.

“Our reported results today are clearly a disappointing performance for which we take responsibility,” said Wachovia Chief Executive Bob Steel on a conference call with analysts. “We are serious about getting on top of these issues quickly and we believe we have a good grasp of the challenges facing the economy, the industry and Wachovia.”

Wachovia has more than 900 employees in Arizona, mostly in the Valley. It has retail branches, commercial and business banking, wealth management and private banking services. Its Arizona headquarters is in downtown Phoenix, said spokeswoman Aimee Worsley.

“We do have mortgage employees in Arizona, but it’s less than 20 percent of our total employee count (there),” she said. “The fact that our mortgage operation is relatively small in Arizona … the impact in Arizona will be minimal. Our presence in Arizona is relatively small. We really just have been in Phoenix … within the last year to year and a half. We really moved into the West in a big way about two years ago when we acquired Golden West Financial.”

Three rating agencies — Moody’s Investors Service, Standard & Poor’s and Fitch Ratings — downgraded their ratings on Wachovia’s debt, citing increased expectations of losses in the bank’s mortgage portfolio and its reduced flexibility to raise new capital.

Wachovia said it lost the equivalent of $4.20 per share in the April-June period. In the same time frame last year, the bank earned $2.34 billion, or $1.22 per share.

Excluding $6.1 billion in write-downs to the value of its intangible assets and merger-related and restructuring charges of $128 million, Wachovia lost $2.67 billion, or $1.27 per share. Second-quarter results include the bank’s October acquisition of A.G. Edwards Inc. The bank said the merger is 40 percent complete.

Analysts on average expected a loss of 78 cents per share on revenue of almost $8.4 billion.

Earlier this month, the Charlotte-based bank had projected a $2.6 billion to $2.8 billion quarterly loss, equal to $1.23 to $1.33 per share, excluding goodwill items.

“Wachovia’s new management has pulled its head out of the sand,” said Bart Narter, senior analyst at Celent, a financial research and consulting firm.