Newspaper article The Florida Times Union

Wachovia Objects to Gloomy Portrayal

Newspaper article The Florida Times Union

Wachovia Objects to Gloomy Portrayal

Article excerpt

Byline: Mark Basch

Wachovia Corp.'s stock has languished since the Charlotte, N.C.-based banking giant announced its acquisition of Golden West Financial Corp. nearly a year ago. But Wachovia CEO Ken Thompson thinks investors have unfairly maligned that $24.2 billion deal.

"What we got, unbeknownst to the market, is a really quality company," Thompson said during a visit to Jacksonville last week.

Golden West was a large California-based savings and loan company that was a major mortgage lender. Some analysts thought the deal could hurt Wachovia's earnings because of the weakening housing and mortgage market, particularly for subprime mortgage loans. But Thompson said Golden West's mortgage portfolio was strong.

"We acquired very little subprime," he said. "Somehow, the market has in their mind we have a lot of subprime exposure. We don't."

But when it comes to the stock market, perception is everything. Stifel, Nicolaus & Co. analyst Christopher Mutascio initiated coverage of Wachovia Friday with a "hold" rating on the stock. He said in a research note that there are a lot of positives at Wachovia, but he added: "We question whether these positives will gain any traction during a time when many investors believe the subprime residential real estate meltdown is just the tip of the iceberg for the housing market and the harbinger of more ominous things to come."

Wachovia's stock fell $3.97 to $55.42 when the Golden West deal was announced last May. The stock has been pretty much stuck in the mid-$50s since then.

"We have to show evidence over a period of time [that the deal is a good one] before the market gives us credit for it," Thompson said.

Mutascio agreed that the integration of Golden West into Wachovia is important for Thompson.

"We believe that, to some degree, CEO Ken Thompson has staked his career and reputation on the success of the Golden West deal. …

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