Transcripts

Wachovia & Bear Stearns Deliver 1st Quarter Disappointment

SUSIE GHARIB: Two big banks kicked off the week with earnings that don't bode well for Wall Street. After the bell today, Bear Stearns released its delayed first quarter earnings. Bear's net income for the quarter fell to $0.86 a share. That's a penny shy of analysts' estimates and down 79 percent from the year ago $3.82 a share. The results predate Bear's fire sale purchase by JPMorgan Chase.

Separately, Wachovia startled Wall Street before the bell with an unexpected quarterly loss and a $7 billion capital infusion. The banking giant was forced to raise cash to offset huge losses tied to the nation's housing slump. Wachovia also announced it was 500 corporate and investment banking jobs and slashing its quarterly dividend. As Suzanne Pratt reports, analysts expect a nasty week for financial firms.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: A bad quarter for big U.S. bank stocks should not sneak up on anyone this week. After Wachovia's surprising first quarter loss today and Washington Mutual's pre- announcement last week of a write down and quarterly loss, analysts widely expect to see additional ugly write downs due to credit market turmoil. According to Thomson Financial, analysts are currently forecasting a 64 percent drop in first quarter profit growth for the financial sector. On January 1, only an 11 percent decline was anticipated. S&P strategist Alec Young says Wachovia's news and GE's earnings shortfall Friday, which the company blamed on the financial market crisis, have created new nervousness among equity investors.

ALEC YOUNG, EQUITY STRATEGIST, STANDARD & POOR'S: When you have companies that really were expected to do OK coming out with some pretty major misses, it just raises the anxiety level as to whether the problems are going to be more widespread than people had been thinking when it comes to first quarter earnings.

PRATT: In addition to Wachovia's loss and Wamu's red flag, Merrill Lynch and Citigroup are also expected to report losses this week. JPMorgan and Wells Fargo are likely to buck that trend and post gains. Experts say the market is most nervous about Citi and Merrill. Analysts are forecasting a double-digit billion-dollar write down for Citi, and single- digit billion-dollar write down for Merrill. Wall Street is mostly hoping for a sign, any type of indication the worst is over for financial firms, but Oppenheimer funds portfolio manager Michael Levine does not think the sector is out of the woods yet. He's looking for evidence that companies are staying ahead of potential problems

MICHAEL LEVINE, PORTFOLIO MGR., OPPENHEIMER FUNDS: We'd like to see them have realistic assumptions about home prices, about the deterioration in the other parts of their portfolio. If they need to raise capital, the sooner they do it, the better and the quicker. Wachovia raised $7 billion this morning. That's certainly a large amount.

PRATT: Experts say some financial firms may also slash their dividends when they report results. While not all companies need the cash, this could be a good opportunity to save some money. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.