Wachovia, continuing the string of industry-wide bank losses, this morning posted a surprise loss, reduced its dividend payout to shareholders, increased credit reserves, wrote off $1.56 billion in debt and went to the well a second time to raise capital — $7 billion in capital.
In comments to Wall Street, Wachovia’s Chief Executive Ken Thompson:
“The most painful decision,” he said, “was to reduce the dividend because it adversely affects our shareholders. But we believe the long-term benefit to shareholder value outweighs the disadvantage of the dividend reduction as we fortify our balance sheet against continued instability in the housing and capital markets.”
Of course, layoffs are in the future with up to 12% of the markets and investment banking unit taking the brunt of the cuts on top of the “similar cuts since the beginning of 2007.”
Just so we’re clear, cutting the dividend was the most painful decision in this surprise loss, not putting employees who service Wachovia’s customers out of a job. Of course.
Perhaps cutting the dividend was most painful because “Thompson in January had said the dividend was safe.” Yup, not understanding what is going on with the finances of the company and reversing course is painful. That’s why it was “the most painful decision.”
Cutting employees jobs off at the knees? Piece of cake.