- The Washington Times - Tuesday, June 3, 2008

CHARLOTTE, N.C. | Less than a month after losing his chairman post and more than two years after an ill-timed acquisition of California mortgage lender Golden West Financial Corp., CEO Ken Thompson was forced to retire from Wachovia Corp., the nation’s fourth-largest bank.

The board of the Charlotte-based bank said it asked Mr. Thompson to leave a few days ago, and acted Sunday to replace him on an interim basis with Chairman Lanty Smith.

Mr. Smith replaced Mr. Thompson as chairman in May in a move the bank said “strengthens independent leadership” at the company.

But several analysts questioned whether Mr. Thompson’s ouster means more problems at Wachovia, a bank that has weathered a series of recent setbacks, including mounting losses and federal investigations. They also speculated that Wachovia could be a takeover candidate, although the bank said Monday that it plans to remain independent.

“Golden West doesn’t help,” said Nancy Bush, an independent analyst with NAB Research LLC in Aiken, S.C. “Makes you wonder if there’s more trouble or change ahead.”

The high-priced deal gave Wachovia a means to expand aggressively into the booming home-lending business while adding hundreds of branches on the West Coast. It also exposed the bank to collapsed housing markets and has led to billions in loan losses that continue to build.

Shares of the bank’s stock have fallen 58 percent in the past year. Wachovia shares lost 40 cents, or 1.7 percent, to close at $23.40 Monday.

Mr. Thompson, 57, is the latest financial services executive to be ousted amid turmoil in the U.S. housing market.

He joins Stanley O’Neal at Merrill Lynch & Co. and Charles Prince at Citigroup Inc., who both presided over huge losses from exposure to bad mortgages, and were subsequently forced from their perches at the top of Wall Street institutions.

Also Monday, Seattle-based Washington Mutual Inc. stripped Kerry Killinger of his chairman title, though he remains the chief executive officer at the nation’s largest savings and loan.

“We will likely see more changes in top brass at institutions hit particularly hard by the subprime mortgage crisis,” said Eva Weber, an analyst with Aite Group, a Boston financial services research firm. “As more losses are incurred, and boards of directors scrutinize decisions around mortgages, we will likely see shifts in management.”

Mr. Thompson’s dismissal comes after several months of withering criticism from shareholders.

He faced calls to resign at the bank’s annual shareholders meeting in April after a first-quarter loss and a 41 percent dividend cut.

Wachovia said in May that it lost $707 million in the first quarter, nearly double the losses it reported earlier, after a review of its portfolio.

Many industry analysts thought Mr. Thompson’s credibility was seriously damaged when he said the bank’s $25 billion purchase of home lender Golden West, a deal he made at the height of the nation’s housing market in 2006, was on solid footing.

Wachovia was forced to set aside $2.8 billion to cover losses from problem loans as a result of the deal, and Mr. Thompson later acknowledged the timing of the deal “was not the best.”

Mr. Smith said there no other senior management changes were planned.

He said the board would consider internal and external candidates for the CEO post, but gave no time frame for hiring a new chief executive.

Mr. Thompson, who has spent his 32-year career at the bank, will not receive any incentive pay for fiscal 2008, but he will get a severance of $1.45 million and accelerated vesting of $7.25 million in restricted stock, according to a Securities and Exchange Commission filing.



Click to Read More

Click to Hide