More Trouble Brewing at Wachovia after CEO ousted

Losses, losses and more losses appear to be the name of the game at Wachovia (WB). Quarter after quarter of losses and increased write down provisions, analysts and investors had hoped the worst had come and gone for the bank. With shares down almost 60% from their 52-week levels, sooner or later the patience well will run dry and for Wachovia's board, that day was today.

After claiming dividends would be safe and then subsequently cutting them (Link) Wachovia showed further chinks in an already severely weakened armor. Today's chink, the axe for CEO Kennedy Thompson. Analysts immediately started speculating that the worst is yet to come and 2nd quarter numbers will show another substantial loss. The company gave a statement that it isn't "in crisis" but shareholders have heard that for the last 2 quarters and having the board oust the CEO in an environment where economic data points have started to slightly rebound certainly makes a bold counter-point.

Analysts have also begun speculating about take-overs or buyouts with respect to Wachovia, but with a $50Billion market price tag, Wachovia doesn't seem the most attractive take over target. However, the credit crisis and sub-prime collapse have crippled some very respectable names over the months and if there's any truth to this speculation shareholders may indeed stick around in the hopes of getting an offer that would boost their holdings near the $40/share range.

It is hard to see in this environment a suitable bidder, although JPMorgan (JPM) seems to make the most sense. Coming off its buyout and rescue of Bear Stearns, JP could take another run in the regional banking sector by trying to get Wachovia on the cheap. However, all signs as of today seem to point to further losses and JP could find itself with Wachovia in the high teens after its next quarterly results hit the wire.

The Financial turnaround will come eventually, and it wont be quick. The major US banks are like tanker ships that can't turn on a whim, so Investors should feel solace and knowing they may get several chances to catch the rebound. Today's announcement at Wachovia shows that this still just isn't the time.

Disclosure: Author does not own WB