Wachovia CEO Resigns, New Chairman at WaMu

123jump.com Staff
02 Jun, 2008
New York City

Wachovia Bank one of the largest banks removed its chief executive officer Ken Thompson and appointed its chairman Lanty Smith as interim chief executive. The move comes after a serious of write downs at the bank and a recent ill timed purchase of the sub-prime lender Golden West. Separately, WaMu removes its CEO from the chairman of the board post.

[R]12:20PM New York – Wachovia replaces it chief executive officer and WaMu replaces its chairman of the board.[/R]

Wachovia Bank ((WB)) one of the largest banks removed its chief executive officer Ken Thompson and appointed its chairman Lanty Smith as interim chief executive. The move comes after a serious of write downs at the bank and a recent ill timed purchase of the sub-prime lender. The board will look for a permanent replacement through a special committee. Ben Jenkins, vice chairman is appointed as its chief operating officer.

Ken Thompson worked at the bank for 32 years and for the last eight years as its chief executive officer. The

Wachovia ((WB)) stock has declined from its high of $58.80 in February to $23.10. The stock has been battered after the bank announced a series of write downs and losses in the last three quarters.

In the latest quarterly results Wachovia Bank reported a loss of $708 million and announced plans to raise $8 billion to replenish its capital base. The bank was also forced to cut its dividend by 41%.

Wachovia purchased Golden West Financial Corp for $25.5 billion or $81.07 per share in May 2006, at the peak of housing market. The mortgage lender had more than 40% of its lending in two states only California and Florida, where home prices had surged on easy access to financing. In the last one year home prices in Florida and California have declined sharply where Golden West had 68% of its deposit base in and 60% of its 285 branches.

At the time of the merger in May 2006, Wachovia estimated that the merger will produce $12 billion in cash earnings in 2008 and $2.2 billion will be contributed by Golden West. The bank went on to say that the merger will produce $5.79 cash earnings in 2008 and 1 cent per share will be contributed by the ‘accretion.’

Washington Mutual removes its CEO from chairman post

Separately, Washington Mutual removed its chief executive officer form the chairman position. Stephen E Frank, the board member will replace Kerry Killinger as the chairman of the board and Killinger will continue to lead the company as its chief executive officer.

China Unicom, Telecom and Netcom in a stock swap deal of $56 billion

Telecom companies in China announced a plan to trade their mobile networks after the government mandated a plan to restructure the industry ahead of the sale of 3G wireless license.

China Unicom Ltd. proposed to acquire China Netcom Group Corp. for HK 187 billion or $24 billion. The second largest mobile carrier, China Unicom will also sell its smaller CDMA mobile network to China Telecom Corp for 66.2 billion or $8.8 billion in cash and sell its operations and subscriber lists for 43.8 billion yuan or $5.6 billion to its Hong Kong listed subsidiary.

Chinese government hopes that after the consolidation from six telecom companies to three, service will improve and market will have healthy competition.

China Netcom will be delisted after the acquisition and shareholders will receive 1.508 of new China Unicom shares. The deal price and stock swap is agreed based on the closing prices on May 23 and the deal is expected to close before the end of the year.

China Unicom will sell its CDMA network to China Telecommunication Corp. The network has 42 million subscribers and is the only CDMA network in the country.

April trade deficit in India rises

Exports from India soared 31.5% to $14.4 billion and imports in the month surged 36.6% to $24.3 billion. Rising crude oil prices continue to drive the oil import bill higher. India imported $8.02 billion, a rise of 46% from a year ago as crude oil prices surge nearly 70% in the period. Trade deficit in the month surged to a record high of $9.8 billion. Rupee against dollar has fallen 7.5% in the last three months helping the exports. For the fiscal 2009 trade deficit is expected to rise to 9%.

European markets

In London FTSE 100 Index traded lower 56.50 or 0.93% to 5,997.00, in Paris CAC 40 Index decreased 72.05 or 1.44% to 4,942.23 and in Frankfurt DAX index edged lower 76.56 or 1.08% to 7,020.23. In Zurich trading SMI increased 40.45 or 0.54% to 7,551.74.