AP
Wachovia confirms Steel to lead bank
Wednesday July 9, 7:41 pm ET
By Ieva M. Augstums, AP Business Writer
Wachovia names Treasury undersecretary as new CEO, sets aside $4.2 billion to cover bad loans


CHARLOTTE, N.C. (AP) -- Wachovia Corp., the nation's fourth-largest bank, named Treasury Undersecretary Robert Steel chief executive on Wednesday, ending a nearly six-week search for a new leader.

The Charlotte-based bank also said it has set aside $4.2 billion pretax to cover bad loans for the quarter, leading to an estimated second-quarter loss of about $2.6 billion to $2.8 billion.

The quarterly loss will equal $1.23 to $1.33 per share, excluding an expected write-down of goodwill. Analysts polled by Thomson Financial expected a profit.

Wachovia is expected to release second-quarter earnings on July 22.

Steel succeeds Ken Thompson, who was ousted by the bank's board in June after a series of missteps.

Among them was Thompson's decision to buy mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the nation's housing boom.

Steel, 56, who has been the Treasury Department's liaison with Wall Street since the fall of 2006, announced his resignation Wednesday, effective immediately. He is an alumnus of investment bank Goldman Sachs Group Inc. He is also a Durham, N.C., native and is chairman of the Board of Trustees at Duke University, his alma mater.

Treasury Secretary Henry Paulson praised Steel and said, "I know he will excel in his future endeavors."

Lanty Smith, who had been serving as interim chief executive, will remain Wachovia's chairman. Smith earned his law degree at Duke and served on the board of trustees from 1997 to 2003.

"Bob is a distinguished and widely respected leader in the financial services sector whose vast experience and deep knowledge make him the ideal candidate to lead Wachovia," Smith said in a statement. "The Board is unanimous in its decision that Bob is the right person to provide sound leadership to build on Wachovia's core strengths and successfully manage the company through the current environment as a strong and independent company."

All business and staff units will report to Steel. Ben Jenkins, who had been interim chief operating officer, will continue to serve as vice chairman and head of the general bank, the bank said.

Wednesday's announcement of a new CEO may hush market rumors that Wachovia is an acquisition target, though the selection of Steel could also fuel questions about the relationship between Wachovia and Goldman Sachs, which has been rumored to be interested in acquiring the bank. Wachovia last month hired Goldman Sachs to analyze its troubled loan portfolio.

And while Steel's impressive resume could help satisfy restless shareholders, he doesn't have experience running a retail bank, Wachovia's forte.

"Clearly, there are challenges ahead in our current climate, but I am encouraged that most areas of the company continue to perform well," Steel said in a statement.

Wachovia shares closed Wednesday down 8 percent at $14.29.

Wachovia Corp.: http://www.wachovia.com