Wachovia Corp, the fourth-largest U.S. bank, said on Friday the value of collateralized debt obligations (CDO) in its portfolio fell about $1.1 billion in October.
The Charlotte, N.C.-based company said in a filing to the Securities and Exchange Commission that it expects fourth-quarter loan loss provisions of $500 million to $600 million.
The weakening markets — which Wachovia estimates could get worse over the last two months of the quarter — cut the value of the bank's CDO holdings by more than 60 percent.
As of September 30, Wachovia had $1.8 billion in CDO exposure. After the write-downs, the exposure is now $676 million.
In the third quarter, Wachovia took a $1.3 billion write-down, market disruption-related losses, this included $347 million of subprime-related valuation losses, net of hedges, on CDOs.
Credit turmoil
Wachovia is the latest financial institution to warn of sharp losses last month in the credit markets.
Last month, Merrill Lynch & Co. took $7.9 billion in subprime mortgage-related write-downs for the third quarter, less than three weeks after saying it losses would only amount to about $4.5 billion.
Citigroup Inc. said it will likely take between $8 billion and $11 billion in write-downs during the fourth quarter, while Morgan Stanley said it will take up to $6 billion in write-downs during its fiscal fourth quarter, which ends November, 30.
November 9 2007