Steel makes case to bank analysts

In a private meeting with analysts Monday, new Wachovia Corp. chief executive Bob Steel made it clear he's bringing an objective, analytical eye to the troubled Charlotte bank he's charged with reviving, attendees said.

Analyst Nancy Bush of NAB Research in New Jersey said that's a much-needed change at a company that has been more focused on getting bigger and more national in recent years. Now Steel, hired less than a month ago, is bringing an attention to the numbers that he honed while at Goldman Sachs Group Inc.

“They're in for a shock in Charlotte,” said Bush, referring to the city's penchant for large, expansionist banks. “But it's the way it's got to be.”

The meet-and-greet luncheon for about 20 analysts in New York was a chance for the former investment banker and Treasury Department official to meet the Wall Street number-crunchers who issue recommendations about his stock. He largely reiterated themes that have emerged early in his tenure, but also gave an update on his evolving executive suite.

Steel told analysts that he doesn't expect any more management changes beyond the recently announced departures of Wachovia's chief financial officer and chief risk officer. He said the bank is about a month away from hiring a CFO and less far along in naming a chief risk officer, analysts said.

A bank spokeswoman declined to comment on the meeting.

The Durham native joined Wachovia after rising mortgage losses and a series of missteps led to the ouster of Ken Thompson. Already, he has announced an $8.9 billion second-quarter loss, cut the quarterly dividend to 5 cents per share and announced plans to eliminate more than 10,000 positions.

RBC Capital Markets analyst Gerard Cassidy said Steel made it clear he doesn't have all the answers, but that his job is to do what's best for shareholders long-term. Cassidy called that kind of candor “refreshing” at a company that is struggling to restore credibility with investors.

“It's great to see that approach, but he still has some major heavy lifting to do,” Cassidy said.

In a question-and-answer session with the analysts, Steel emphasized previously announced plans to preserve $5 billion in capital, cut expenses, reduce the loan portfolio and to possibly sell off “non-core” assets, Cassidy said. Steel didn't provide specifics on any businesses he might consider dropping.

Steel downplayed any plans to raise capital through a stock offering, and he stressed ongoing efforts to stabilize the company's troubled Pick-A-Payment loan book. He said a Goldman Sachs review of the bank's loans confirmed Wachovia's own findings. Last month, the bank said it expects cumulative losses of 12 percent in the $122 billion Pick-A-Pay portfolio.

The meeting didn't help Wachovia's stock price. The shares fell nearly 10 percent to $17.11 after a Morgan Keegan analyst earlier in the day said a recent upsurge in the stock price was unwarranted. The stock had jumped 9 percent on Friday, partly because of rumors of a possible Goldman Sachs takeover.

Asked about the possibility of a sale, Steel reiterated statements that he'll do what's best for shareholders while emphasizing plans to build the company. Bush said she asked if he was brought in to sell the company to Goldman, as some of her clients wonder, and she got a simple answer: No.