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The New Wachovia

Posted by: Matthew Goldstein on September 29, 2008

Talk about fast transformations. It was only a week ago when Goldman Sachs and Morgan Stanley shed their investment banking skins to become commercial banks in a bid to stem a bloodbath in both firms’ stocks. And now it’s troubled Wachovia’s turn to do a sudden, life-saving metamorphosis.

With the help of the FDIC, Wachovia has converted itself into one of the nation’s largest stand alone asset-management firms. In selling its banking operation to Citigroup for $2.1 billion, Wachovia now becomes a publicly traded brokerage with $1.1 trillion in customer trading accounts and a money-management firm with $243 billion in assets under management. The Charlotte, NC-based firm retains the nation’s third-largest fleet of brokers. Its Evergreen Investments money-management firm is a major operator of institutional money market funds.

Wachovia’s big move into the retail brokerage business began in 2003 when it entered into a joint venture with Prudential Financial, which led to the formation of Wachovia Securities. Last year, the brokerage division got even bigger with Wachovia’s $6.8 billion acquisition of St. Louis-based A.G. Edwards. Prudential still retains a sizeable 28%equity stake in Wachovia Securities. Prudential had no comment.

Of course, it’s not clear how long the slimmed down Wachovia will remain as an independent entity. An asset-manager that’s not weighed down with toxic mortgage-backed securities may be attractive to a firm looking to beef-up its retail brokerage operation.

Reader Comments

David Bousquet

September 29, 2008 1:17 PM

Shareholders will make a profit!? People sold outta fear this morning, I bet they are kicking themselves with all this new transpiring GOOD news about WB, we might get 1$ of citi and still have a 5-15 dollar stock in WB.


September 29, 2008 1:21 PM

Billions of $$$ of preferred likely remains on the WB balance sheet, consistent with the capitalization of a much larger company, and with substantial dividend requirements. Maybe they will use some of the $2B from Citi to tender for some at a discount - but how this plays out is critical for the WB common shareholder.

Jim Pivonka

September 29, 2008 4:01 PM

I'm congenitally, irreversibly rist averse. And I have less than 50K cash/invest base.

But intuitively I am salivating over the new Wachovia. That preferred dividend funding is a problem; if it can be worked out this may be one of the great opportunities after the impending money supply collapse has been worked out.


September 29, 2008 6:10 PM

The world's largest financial institutions reported more than in asset writedowns and credit losses tied to the U.S. housing slump, according to Bloomberg data.Wachovia's board asked Thompson to leave ``several days ago'' and acted yesterday, Smith said during a news conference.

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September 29, 2008 8:37 PM

Why is it that Citi does not find these assets attractive? Perhaps they don't need the retail brokerage, but why not Evergreen funds?


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