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.

jeff

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.

jacksen

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.
-------------
jacksen

Internet marketing

Bob

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?

jena

October 1, 2008 8:19 AM

Excellent content - as you always provide and inspires me to come again and again. You are on my RSS reader now so I can read more from you down the road.
By the way, there is one more valuable resource I’d like to share with others readers. It’s called Secrets of Successful Traders that teaches you…

• Would you like to turn your $1000 into $1 Million by the end of Year 2012- guaranteed?

• Recently, I reviewed a very unique stock trading company that has helped thousands of people to make money from the stock market- safely, easily and consistently...

and, for a small fee, they are willing to show you exactly how they did it.
For more info & special discount, visit: http://www.2stocktrading.com/discount.html

jena.

jenakim11@gmail.com .

http://www.2stocktrading.com/discount.html

Post a comment

 

About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

BW Mall - Sponsored Links

Buy a link now!