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Wachovia 2Q soars
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July 11, 2001: 9:16 a.m. ET
Regional bank, target of SunTrust and First Union, boosts 2Q earnings 76%
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NEW YORK (CNNfn) - Regional bank Wachovia Corp., a plum takeover target for First Union Corp. and SunTrust Bank Inc., reported quarterly earnings Wednesday that soared 76 percent and edged Wall Street expectations.
Wachovia reported second-quarter earnings before one-time items of $252.7 million, or $1.22 a share, up from $143.3 million, or 70 cents a share, a year earlier. Wall Street analysts expected Wachovia to earn $1.20 a share, according to earnings tracker First Call.
"We are pleased to report higher-than-expected revenues in a period of soft economic growth," CEO L.M. Baker Jr. said. "During the period, we maintained diligent expense control and continued to take prudent and aggressive actions to mitigate credit risk and strengthen loan loss reserves."
Wachovia, which has headquarters in Atlanta and Winston-Salem, N.C., said it took advantage of lower interest rates – the Federal Reserve Bank has slashed its target on the fed funds rate, an overnight bank lending rate, to 3.75 percent from 6.5 percent this year – to make money on securities transactions.
Gains on securities offset a $215.7 million charge in the quarter for bad loans, Wachovia said.
Revenue in the quarter rose to $1.15 billion from $983.8 million a year ago.
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Wachovia's performance, surprisingly strong during a time when it and most other banks are suffering from bad loan losses, is one reason the battle between First Union and SunTrust for Wachovia has become so bitter.
Wachovia shareholders are scheduled to vote Aug. 3 on an offer by First Union (FTU: down $0.11 to $32.96, Research, Estimates) to exchange two shares of First Union stock for each share of Wachovia. First Union also offered to pay a dividend of 48 cents a share to Wachovia shareholders.
After the deal was announced in April, SunTrust (STI: up $0.24 to $63.10, Research, Estimates) made an unsolicited bid of its own, prompted possibly by the relatively low premium -- about 6 percent when the deal was announced -- First Union offered for Wachovia shares. SunTrust offered 1.08 SunTrust shares for every Wachovia share.
A takeover of Wachovia (WB: down $0.15 to $67.46, Research, Estimates) by Charlotte-based First Union, the nation's sixth-largest bank, would create the fourth-largest U.S. bank. 
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