Wachovia today reported the largest quarterly loss of any US financial services group since the credit crisis began after announcing a $23.9 billion (£14.6 billion) deficit for the third quarter on the back of mushrooming losses on mortgages.

The bank, which is being acquired by Wells Fargo, said its third-quarter results included an $18.7 billion writedown, of which about two thirds related to its retail and small-business operations, where its $118.7 billion portfolio of option adjustable-rate mortgages lies.
These are regarded as particularly high risk because many are due to reset at a higher rate this year.

Most of the remainder of the writedown related to commercial banking, asset management and wealth management operations.

Wachovia also reported $4.8 billion in charges to build credit reserves, $2.5 billion in market-disruption losses and $1.1 billion in costs associated with buying back auction-rate securities.

Robert Steel, Wachovia’s chief executive, said: "Although this has been a challenging quarter, Wachovia’s underlying businesses remain solid and our franchise exceptionally attractive."
Howard Atkins, Wells Fargo’s chief financial officer, added: "We believe that it was prudent for Wachovia to put these losses behind it."

"The asset writedowns, reserve build and other items are consistent with our acquisition assumptions" and "will have no impact on tangible capital of our planned capital raise", he said.