Wachovia Corp. chief executive Ken Thompson was pushed out Monday as head of the nation’s fourth-largest bank, becoming the latest financial services executive to be ousted amid turmoil in the U.S. housing market.
Thompson 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 out from their perches at the top of Wall Street institutions.
The Charlotte-based bank said last month that it lost $707 million in the first quarter, nearly doubling the losses it reported earlier after further review of its portfolio.
Thompson will not receive any incentive pay for the 2008 fiscal year, but according to a filing with the Securities and Exchange Commission, he will get a severance of $1.45 million and accelerated vesting of $7.25 million in restricted stock.
“A lot of that is in place before these announcements come,” said Sandler O’Neill & Partners LP analyst Kevin Fitzsimmons. “Unfortunately, it’s standard fare.”
The bank’s shares tumbled more than 4 percent to a new 52-week low of $22.72 in early trading, following a broad descent in the European banking sector Monday.
The board of the Charlotte-based bank said it asked Thompson, 58, to retire and replaced him on an interim basis with Chairman Lanty Smith. Smith replaced Thompson as chairman last month in a move the bank said “strengthens independent leadership” at the company.
“It has been an honor to serve this great company for 32 years and to lead it for the past eight years,” Thompson said in a statement issued by the bank. “Together we achieved great successes and overcame tough challenges.”
Smith said Monday “this was a step that was taken after very careful consideration,” and one that was precipitated by no single event but rather a “series of previously disclosed setbacks.”
“It’s been our hope and expectation that Ken would serve for several more years,” Smith said during a conference call with reporters. “We certainly wanted Ken to succeed. This is earlier than any of us wanted or choose.”
Smith said there were no other senior management changes planned. A search for the next chief executive began immediately after Sunday’s board meeting, he said.
The change at Wachovia comes after a dismal start to 2008 that followed a weak 2007.
After revealing that its losses were wider than earlier reported last month, the bank disclosed in a regulatory filing that its securities unit and affiliates have received inquiries and subpoenas from federal and state regulators over auction-rate securities.
Wachovia had already reached a $144 million regulatory settlement related to telemarketers who took advantage of thousands of elderly consumers. It said it may take an after-tax charge of between $800 million and $1 billion in the second quarter tied to past transactions, which involved lease-to-service contracts and leases of technological equipment.
“All of these collectively played a role,” Fitzsimmons said. “Ken’s creditably with shareholders, employees and regulators suffered to a point that the board realized if they had a chance to restore the company’s stature, it was now.”
Many analysts believed Thompson’s credibility was seriously damaged when he said the bank’s roughly $25 billion purchase of home lender Golden West Financial Corp., a deal he made at the height of the nation’s housing bubble in 2006, was on solid footing.
He later acknowledged the timing of the deal “was not the best,” and Wachovia was forced to set aside $2.8 billion to cover losses from problem loans.
Shares fell $1, or 4.2 percent, to $22.80 in late morning trading.
The company’s business lines — its general bank, wealth management, the corporate and investment bank and capital management — will report to Ben Jenkins. Currently the bank’s vice chairman and president of its general bank, Jenkins will serve as Wachovia’s interim chief operating officer.
Smith has been a director since 1987, a lead independent director since 2000, and served as chairman of Wachovia’s executive committee. He is chairman and CEO of Tippet Capital, a merchant banking firm in Raleigh.