Friday, 9 November 2007

Wachovia ups provisions

From Bloomberg:

Wachovia to Raise Allowance for Loan Losses in Fourth Quarter

Wachovia Corp., the fourth-largest U.S. bank, said it expects to increase its allocation for loan losses to as much as $600 million in the fourth quarter.

"Wachovia now expects to record a loan loss provision in the fourth quarter of 2007 by an amount estimated to be between $500 million and $600 million in excess of charge-offs for the quarter,'' Charlotte, North Carolina-based Wachovia said in a filing with U.S. regulators dated yesterday. The company cited "anticipated loan growth and the impact of continuing credit deterioration in our loan portfolio.''

The graph above assumes a 4Q07 provision for loan losses of $550m for Wachovia. That raises the full year total of loan losses for 2007 to $1,314m up more than 200% from the $434m in 2006.

Whilst not as bad, this is the same trend we see at Washington Mutual and you can bet that elevated loan loss provisions will persist into 2008 for Wachovia putting a dampening effect on earnings.