Wachovia Corp. Chief Executive G. Kennedy Thompson on Wednesday said the bank planned no more big acquisitions for a "significant" amount of time as it digested California's Golden West Financial Corp., which it agreed to buy in May for $25.5 billion.
The purchase, Thompson's largest as CEO, has sparked criticism from investors unsure of Wachovia's ability to integrate the No. 2 U.S. thrift and benefit from Golden West's specialty, adjustable-rate mortgages, as home lending cools.
Adding Oakland-based Golden West, which operates World Savings Bank, gives Wachovia 285 new branches and makes it a major competitor in California to such rivals as Bank of America Corp. and Wells Fargo & Co.
But shares of Charlotte, N.C.-based Wachovia have lost about one-eighth of their value since the purchase was announced May 7. That has cut the value of the stock-and-cash deal by about 10%, to the $23-billion vicinity.
"We will be out of the deal business, the big-deal business, for a significant period of time," Thompson said during a conference call sponsored by Prudential Equity Group.
He said the bank would instead focus on blending in Golden West and expanding existing businesses.
On Wednesday, Wachovia shares fell $1.01 to $52.03 as interest-rate worries sent shares of most big U.S. banks lower. The shares traded at $59.39 before the Golden West acquisition was announced.
Although Wachovia has taken pains to sell the deal to Wall Street, some remain unconvinced.
They point to lowered demand for home loans in addition to pressure on banks' margins as short-term interest rates rise. The latter has resulted in a "flat" yield curve, in which long- and short-term rates are about the same.
"Wachovia wants to rework a well-run, very successful thrift into a commercial bank with new products," said Jeff Davis, a banking analyst at FTN Midwest Research in Nashville.
"The market's fear is that the yield curve stays flat, California's real estate market turns downward, and Wachovia bought a much bigger project than it realized," he added.
Wachovia plans to cut 1,100 jobs and 55 branches after the Golden West deal and to rebrand World Savings branches with the Wachovia name.