Wachovia has joined the parade of commercial and investment banks announcing first quarter losses and an intent to raise capital to carry it through the looming months of credit reversals.

The nation's fourth largest bank announced Monday that it lost $350 million in the first quarter or $.20 per share, a loss that analysts had not expected. The bank had earned $2.3 billion - $1.20 per share - in the first quarter in 2007. The first quarter loss was caused by $2 billion in asset write-downs and $2.1 billion in provisions against credit losses.

The bank said that it will cut its dividend (currently $0.64) by 41 percent for a savings of $2 billion and will raise $7 billion through the sale of $350 billion in common and another $350 billion in preferred stock.



In addition to losing a chunk of their dividend, common stockholders will have their equity in the company diluted by an approximate 14% discount from Friday's closing price. Preferred stock will pay a 7.5 percent dividend and it will be convertible into common stock at $31.20 a share. Wachovia had sold $3.5 billion in preferred stock two months ago.

The stock was trading at $24.97 during late morning trading on Monday, down 10.18 percent from the Friday close. Within the last year the stock has traded as high as $56.90.

The company's problems began when it purchased Golden West a California bank and mortgage lender for $25.5 billion two years ago. Wachovia had coveted Golden West's branch network but the acquisition exposed Wachovia to aggressive mortgage lending activities which included a heavy emphasis on interest only loans and Option ARMs ' adjustable rate mortgages where the borrower can choose to pay the full amount of the monthly payment, interest only, or any amount in between.

The bank also announced plans to cut investment banking positions by 12 percent during the second quarter. This will bring job losses over the last year to about 25 percent of the bank's employers.

The bank has not only been hit by a high rate of delinquencies in mortgages, especially in California, but by losses in its auto, credit card, and home equity businesses. And it may face problems in its commercial real estate division where it holds about $12 billion in construction loans.