This is the beginning of a trend...those companies that refuse to expense options, imo, will be percieved as having "something to hide"...
Wachovia to Expense Options
By PAUL NOWELL 07/18/2002 16:36:07 EST
CHARLOTTE, N.C. (AP) - Wachovia Corp., the nation's fourth-largest bank, Thursday joined a short list of large U.S. corporations that will count stock options as an expense.
Speaking on a conference call on the bank's second-quarter earnings, Wachovia president and chief executive officer Ken Thompson called the decision part of the Charlotte-based bank's "commitment to good corporate governance."
"We are committed to be an industry leader in corporate governance," he told analysts, adding that the bank has made previous moves in the same direction, notably the reduction in the size of its board of directors.
Bank officials said the impact of counting the stock options as an expense would amount to a penny per share for each quarter. On Sunday, The Coca-Cola Co. become the first major U.S. firm to count stock options as an expense.
Thompson's announcement came as Wachovia reported a 36 percent gain in its second-quarter profits, following an industry trend of taking advantage of low interest rates to grow its mortgage business and deposits.
Despite the earnings news, Wachovia's share price was down Thursday because of the large amount of bad loans it had to write off in the quarter.
Shares of Wachovia were down $2.16, or 6.2 percent, to close at $32.36 in trading Thursday on the New York Stock Exchange.
Wachovia had $374 million in net charge-offs, which are loans that the bank does not expect to be paid back. The losses included $225 million related to Argentina and the U.S. telecommunications industry.
Created by last year's $14.6 billion merger of First Union Corp. and the old Wachovia, the bank earned $862 million, or 63 cents a share, compared with $633 million, or 64 cents a share, in the second quarter of 2001. The bank did not restate results before the September merger.
Without the merger and restructuring charges, the bank earned $957 million, or 69 cents a share, in the current quarter. That met the consensus estimate of Wall Street analysts surveyed by Thomson First Call.
"This was another solid quarter for our company, which reflects the hard work and dedication of our people in serving customers in a difficult economic environment," said Thompson.
Rising bank deposits and brisk business in mortgage lending and refinancing have helped the U.S. banking industry in the second quarter. With interest rates at a 40-year low and the stock market's problems, more consumers are investing their money in banks.
The bank's efficiency ratio improved to 56.3 percent in the quarter and average core deposits in the General Bank increased 3 percent.
Nonperforming assets, including assets held for sale, rose 1 percent in the quarter.
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