October 19, 2007, 8:13 am
Wachovia Joins BofA in Investment-Banking Dog House
Posted by Dana Cimilluca
Wachovia Joins BofA in Investment-Banking Dog House
Posted by Dana Cimilluca
Charlotte may wish it never heard the words “investment banking.”
First, Bank of America, headquartered in the North Carolina city, reported abysmal results yesterday, dragged down by a trading blow-up at its investment banking unit in New York. Then today Wachovia, BofA’s cross-town rival, reported another bleak set of results, courtesy of a big decline in earnings at its corporate and investment bank (to $105 million, from $533 million in the third quarter of 2006).
Nearly $600 million of the losses at Wachovia are thanks to commercial and consumer mortgage structured products, a business that has hurt a number of the Wall Street banks — but which BofA has pretty much stayed away from. And Wachovia doesn’t seem as embittered with the investment-banking business as BofA chief Ken Lews. Wachovia noted in its earnings release its “strong advisory and underwriting fees largely from structured products, merger and acquisition advisory services, and equities underwriting.”
Still, it’s not hard to imagine there will be a reckoning in the form of job cuts at both banks.Indeed, the Charlotte Observer speculates that the third quarter was a “defining moment” for Lewis, who might want to focus on the company’s massive consumer banking operation and put aside his long-held — and expensive — ambition to become a player in investment banking.