Wachovia, PNC raise 4Q loan loss writedown estimates
CHARLOTTE, N.C. -- Wachovia Corp. doubled its estimate of loan loss provisions to about $1 billion for the fourth quarter on Wednesday, while the chief executive of rival Bank of America Corp. said he expects current credit market turbulence to extend into 2008.
A third major bank, PNC Financial Services Group Inc., said its adjusted credit loss provision for the last three months of the year will be more than twice as large as in the third quarter.
The disclosures come as a number of the nations' banks have forecast increasing credit losses in the wake of last summer's subprime mortgage crisis.
In a filing with the Securities and Exchange Commission last month, Charlotte-based Wachovia had said it expected to record a loan loss provision in the fourth quarter between $500 million and $600 million.
"The economy is definitely slowing," Bank of America's chief executive Ken Lewis said in a discussion with financial analysts in New York. "We expect weak fourth and first quarters, but at this point we are not forecasting a recession. I think you certainly can assume results will again be quite disappointing."
Wachovia shares fell 95 cents, or 2.3 percent, to $41 in morning trading Wednesday, while Bank of America shares lost 38 cents to $44.27 and PNC shares dropped 88 cents to $69.88.
All three were making presentations at an investment conference hosted by Goldman Sachs.
In November, Bank of America said it would take a $3.3 billion debt-related write-down in the fourth quarter and warned its losses could grow, adding to fears the nation's housing and mortgage-lending slump might exact a greater toll than in the wretched third quarter -- when industrywide write-downs topped $46 billion.
The bank said it will also spend about $600 million to support a group of its money market funds because of "uncertainty around the value" of the funds' investments. Of specific concern are the funds' holdings in structured investment vehicles, which use borrowed money to make risky but potentially high-yielding investments.
On Monday, Bank of America said it would liquidate a privately placed, enhanced institutional cash fund, closing it off to new investors, due to withering losses on complex asset-backed securities.
"Based on conditions today, we expect those writedowns will be larger than have already been reported - although obviously we won't know our final numbers until we close the fourth quarter," Lewis said. "We will discuss those numbers on the January earnings call."
Also on Wednesday, PNC Financial Services said in a regulatory filing that it expects to report fourth-quarter earnings in the range of 60 cents to 75 cents a share, and adjusted earnings will be between $1 and $1.15 a share.
Analysts polled by Thomson Financial, on average, forecast a profit of $1.39 a share for the Pittsburgh-based company. Those estimates typically exclude one-time items.
The company said its adjusted provision for credit losses is expected to be about $110 million in the fourth quarter, up $45 million from the previous quarter.