Wachovia shares drop to 1992 levels

Wachovia Corp. shares fell as much as 10 percent Friday amid renewed worries about potential loan losses.

By the close of trading, the Charlotte bank's shares recovered some ground to close at $18.19, down $1.12, or nearly 6 percent. The stock hasn't been this low since 1992.

Overall, markets were up Friday, along with most financial stocks. Bank of America Corp. shares rose about 1 percent to $29.78.

RBC Capital Markets analyst Gerard Cassidy said woes at other banks helped spur more jitters about Wachovia, which ousted chief executive Ken Thompson last week.

California-based Downey Financial Corp., which specializes in adjustable-rate mortgages, on Friday said problem loans as a percentage of assets rose to 14.33 percent in May from 13.23 percent a month earlier. Wachovia has a large portfolio of adjustable-rate mortgages from its 2006 acquisition of California-based Golden West Financial Corp.

Cassidy said investors also may have seized upon a disclosure by Cleveland-based KeyCorp that it continues to see a “normal downward migration” in its commercial real estate and commercial loan portfolios. “I think people are waking up to the fact that this (downturn) is far from over,” Cassidy said.

KeyCorp shares slipped 2 percent on Friday after it raised $1.65 billion in capital to shore up its balance sheet.

Investors also continue to worry about whether Wachovia will need to reduce its dividend again after a 41 percent cut in April. That's also a fear among Bank of America's shareholders.

Cassidy said Wachovia shares still have room to fall further, citing the depths bank stocks reached in the 1990-1991 recession. Wachovia shares are down 52 percent this year, more than double the decline in the KBW Philadelphia Bank Index.

The bank's troubles have spurred worries about a possible takeover by a rival. But Cassidy noted that its loan problems could prove a deterrent to any possible buyer.