Magazine article American Banker

First Union Stock Flutters as Writedown Rumors Fly

Magazine article American Banker

First Union Stock Flutters as Writedown Rumors Fly

Article excerpt

First Union Corp.'s shares flirted with their 52-week low Thursday as speculation circulated that the Charlotte, N.C., banking company might take a billion-dollar writedown in the second quarter. Concerns about First Union's credit quality and the costs of its restructuring have been pressuring its stock ever since the company pulled out of a Sanford C. Bernstein & Co. conference two weeks ago. Rumors blazed anew Thursday after PaineWebber Inc. issued a report predicting the huge writedown. Analyst Ruchi Madan predicted First Union would take the dramatic step to improve its long-term flexibility and profitability. The charge would probably include $150 million to $500 million related to underperforming businesses, she said, such as credit cards, residential mortgages, and the Money Store. The company would also boost its loan-loss reserve by $200 million to $300 million and would probably take a restructuring charge of $150 million to $200 million, she said. Though the shares fell as low as $27.75, they recovered late in the day to close at $28.75, up 1.32% for the day. First Union's stock hit a 52-week low of $27.3125 last Friday. Savings from the moves could total $180 million annually beginning in 2001, Ms. Madan said. Concerns about credit quality took off last week after Wachovia Corp. of Winston Salem, N.C., a company known for its stellar credit quality, warned that it would not make analysts earnings estimates because of problem loans. …

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