Wachovia cuts "won't have an impact" on St. Louis operations

Jul 23, 2008 (St. Louis Post-Dispatch - McClatchy-Tribune Information Services via COMTEX) -- WB | Quote | Chart | News | PowerRating -- Wachovia Corp. on Tuesday announced plans to eliminate 6,350 jobs, but the work force cuts are not expected to affect the bank's St. Louis-based brokerage business.

After reporting a second-quarter loss of $8.9 billion on Tuesday, Wachovia Chief Executive Robert Steel announced plans to cut $2 billion of expenses at the Charlotte, N.C., financial services firm by the end of next year.

Wachovia's cost-cutting initiative "will not have an impact" on its plans for St. Louis-based Wachovia Securities, says Danny Ludeman, president and chief executive of the brokerage.

Most of the cuts are expected to be tied to Wachovia's foundering mortgage business. The company also cut its quarterly dividend to 5 cents per share from 37.5 cents, which will save approximately $700 million per quarter.

Two years ago, Wachovia spent $24 billion to buy mortgage lender Golden West Financial Corp. just as housing prices were peaking.

The housing market has since collapsed, especially in California and Florida, where Golden West was heavily invested.

Late Monday, Wachovia announced plans to leave the wholesale mortgage lending business. And beginning Friday, the company will no longer offer mortgages through brokers.

The securities group, on the other hand, is still on track to add 500 to 1,000 new jobs within two years, Ludeman said. It has hired more brokers than any firm in the industry for the last three years. Its retention level for A.G. Edwards and the legacy Wachovia brokerage business is about normal, with about 3 percent attrition among brokers who produced annual revenue of $250,000 or more.

At the end of the quarter Wachovia had 14,632 brokers, an all-time high.

The brokerage business had record first-half revenue of $4.3 billion and pre-tax operating profit of more than $1 billion, Ludeman said. The acquisition of A.G. Edwards contributed to 10 percent growth in retail brokerage deposits for Wachovia Corp.'s capital management segment.

However, overall earnings at the capital management subsidiary fell in the second quarter to $297 million from $312 million. The unit includes A.G. Edwards and the Evergreen asset management company.

Ludeman said integration of the A.G. Edwards and Wachovia Securities business is about 40 to 50 percent complete. The companies have converted to common payroll and human resource systems, and new products have been introduced to A.G. Edwards brokers.

The company expects to complete its technical conversion to a common information technology and operations platform on President's Day weekend next year, Ludeman said.

When asked about last week's special inspection in an auction rate securities probe by regulators from Missouri and other states, Ludeman said the company is cooperating.

"We were a fairly moderate seller of auction rate securities," Ludeman said. "The states and other agencies are investigating almost everyone."

Bloomberg News and The Associated Press contributed to this report.

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