The Wall Street Journal reports that Wachovia has entered into discussions of a sale of the bank. Wachovia had a recent dalliance with Morgan Stanley, but those talks struck us as the height of desperation (it was hard to see a fit between the two firms), although Morgan Stanley at that juncture needed to make a move worse than Wachovia did.
The apparent seriousness of the conversations suggests that the end-game for the Charlotte bank is nigh, sale or no sale. The fall today in the bank’s stock price, despite the absence of evil shorts, says the bank either has or is on the verge of losing the ability to raise new capital on anything other than punitive terms. That is an untenable position in this environment.
From the Wall Street Journal:
Wachovia Corp. has entered into preliminary discussions with a handful of potential suitors, including Banco Santander SA of Spain, Wells Fargo & Co. and Citigroup Inc., according to a person familiar with the situation.
The talks underscore escalating efforts by the Charlotte, N.C., bank to escape mounting loan losses and a plunging stock price. On Friday, Wachovia shares tumbled 27%, or $3.70, to $10 in New York Stock Exchange composite trading.
Wachovia officials don’t believe they need to rush into a deal, and the bank isn’t feeling any liquidity pressures, a person familiar with the company said. Still, given the uncertainty swirling through the economy, financial markets and the U.S. banking industry, Wachovia executives are exploring various strategic options.
Bank executives are expected to be in New York this weekend to discuss possible deals….
Banco Santander, Wells Fargo and Citigroup all pored over the books of Washington Mutual Inc. before the Seattle-based thrift was seized Thursday by federal regulators and its banking operations sold to J.P. Morgan Chase & Co. for $1.9 billion. Their interest in Wachovia is a further sign that the banking industry’s turmoil is triggering a streak of opportunism by banks that consider themselves strong enough to made a deal, even though that likely would mean absorbing a slew of soured loans from the acquired bank.