4/13/2008 11:24:13 PM The Wall Street Journal reported on Sunday that Wachovia Corp. (WB) is finalizing a capital infusion of between $6 billion and $7 billion by an investor group to shore up its capital base. A fear of cheap acquisitions lingers following the acquisition of Bear Stearns Cos. Inc. (BSC) by J.P. Morgan Chase & Co. (JPM). The Journal reported that deal could be announced as soon as Monday, with the final details being worked out late Sunday. This comes close on the heels of the news that Washington Mutual, Inc. (WM) or WaMu is raising an aggregate $7 billion capital through direct sale of equity securities to an investment vehicle. Separately, Wachovia announced in a press release that it would release its first quarter financial results on April 14, instead of the earlier date of April 18.

The Charlotte, North Carolina-based Corporation is expected to sell-off its shares to an investor group for about $23 to $24 per share, representing a 15% discount on Wachovia stocks closing price on Friday. Wachovia, which is expected to raise about $6 billion and $7 billion through this sale, had in February raised capital through the issuance of preferred stock.

Shedding off a little flab, Wachovia bank N.A. in mid-March agreed to sell-off more than one hundred surplus bank branches in 2008, with a market value of more than $100 million, to American Realty Capital II, LLC.

Earlier in February, Wachovia had announced issuance of $3.5 billion in preferred stock to shore-up its capital base. The $3.5 billion perpetual preferred stock will pay a dividend of 7.98% for 10 years and thereafter change to a floating interest rate. Wachovia may redeem the preferred stock after 10 years.

Wachovia’s Tier 1 capital ratio, a measure of capital strength, was 7.2% at December 31. Following the February preferred stock offering, Wachovia’s Tier 1 capital ratio would rise to about 7.9%. Wachovia plans to continue building Tier 1 capital through retained earnings over the course of 2008.

Following reports on the capital infusion today, Wachovia announced that it will report its first quarter financial results on April 14, instead of the previously announced date of April 18. Wall Street analysts expect the company to report earnings of $0.40 per share on revenues of $7.91 billion for the first quarter.

Wachovia’s profits for the fourth quarter plunged from last year hampered by loss in valuation of some portfolios to the tune of $1.7 billion and a provision for credit losses of $1.5 billion. The results of the company indicated the gravity of credit market crisis given the whopping provision for bad loans, though in tune with the present market scenario. Wachovia was also no exception from the sub-prime imbroglio that affected the financial industry as a whole.

In January, Wachovia completed the acquisition of A.G. Edwards Inc. for $6.8 billion, which was announced in May 2007. Wachovia stated that A.G. Edwards will be combined with Wachovia Securities LLC to create a brokerage firm with $1.1 trillion in client assets and nearly 15,000 financial advisors. In addition, Wachovia revealed that the A.G. Edwards’ investment banking business will be combined with Wachovia Capital Markets LLC. Wachovia Securities and AG Edwards will continue to operate under separate names until 2008. The merger integration is scheduled to be completed in 2009.

The trouble at Wachovia stems largely from its 2006 acquisition of California-based mortgage lender Golden West Financial Corp. for about $24 billion. Golden West’s loans were concentrated in California, one the hardest-hit housing markets in the U.S.

Last week, WaMu said it would raise an aggregate $7 billion through direct sale of equity securities to an investment vehicle managed by TPG Capital and to other investors, including many of WaMu’s top institutional shareholders. TPG’s investment vehicle, as anchor investor, will purchase $2 billion in newly-issued WaMu securities. WaMu also noted that it is cutting its quarterly dividend to strengthen its capital base. The capital infusion is likely to eliminate the possibility that the 119-year-old WaMu would be acquired by J.P. Morgan or another large financial institution. Recently, J.P. Morgan agreed to acquire troubled investment bank Bear Stearns.

The capital infusion in to WaMu and now Wachovia is also considered to be an encouraging sign for the ailing banking system in the U.S. The current credit crisis also provides a rare opportunity for private investors to pick up once-thriving financial institutions on the cheap. Due to the ongoing credit crunch, Countrywide Financial Corp. (CFC) had to seek an emergency sale to Bank of America Corp. (BAC) earlier this year, while others have gone broken amid mortgage losses.

In recent times, Wall Street firms including Lehman Brothers Holdings Inc. (LEH) and Switzerland’s UBS AG (UBS) have announced measures to strengthen their capital base. Earlier this month, Lehman Brothers said it priced a $4.0 billion offering of 4 million shares of non-cumulative perpetual convertible preferred stock, Series P, with a par value of $1.00 per share and a liquidation preference of $1,000 per share.

Also, UBS said that it would issue rights to raise about 15 billion Swiss francs in capital to mitigate the increasing losses. Earlier this month, Thornburg (TMA) said it raised $1.35 billion to shore up its capital base and avoid bankruptcy. Big Wall Street firms like Citigroup Inc. and Merrill Lynch & Co. (MER) have also sought cash infusions after record losses tied to sub-prime home loans.

The sub-prime mortgage financial crisis continues to haunt the financial industry. Rising interest rates, increasing the monthly payments on newly popular adjustable rate mortgages, together with property value declines from the demise of the United States housing bubble, left many homeowners unable or unwilling to meet financial commitments, and lenders without a means to recoup their losses. Many observers believe this has resulted in a severe credit crunch, threatening the solvency of a number of marginal private banks and other financial institutions. The value of U.S. sub-prime mortgages was estimated at $1.3 trillion as of March 2007 with over 7.5 million first-lien sub-prime mortgages outstanding.

On April 8, the International Monetary Fund, or IMF, said the worldwide losses stemming from the US sub-prime mortgage crisis could hit US$945 billion. The IMF, in a particularly stark biannual report, said that falling US housing prices and rising delinquencies on the residential mortgage market could lead to losses of US$565 billion.

WB closed Friday’s regular trading session at $27.81, down $0.06 or 0.22% on a volume of 31.03 million shares, lower than the three month average volume of 33.90 million shares. In the past 52-week period, the stock has been trading in a range of $23.77 to $56.90.