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As more banks report write-downs tied to the global credit crunch, analysts say Wachovia may have losses lurking in an area that has garnered less investor attention.
The fourth-largest U.S. bank [ WB 5.68 
-0.14 (79,678,960.00%) ] has in recent years aggressively tried to add market share by underwriting commercial mortgage-backed securities.
Demand for such securities has slid amid credit concerns, leaving dealers struggling to unload loans whose quality might be perceived as less sound than investors now demand.
Analysts have estimated Wachovia's net CMBS exposure at about $9 billion. They say the Charlotte, North Carolina-based bank could face a related fourth-quarter write-down as large as $1.5 billion.
"CMBS-related write-downs may wipe out earnings" in the quarter, wrote Howard Mason, an analyst at Sanford C. Bernstein, on Dec. 6. He projects a $1.5 billion write-down for the securities, on top of $488 million in the third quarter.
Meanwhile, Credit Suisse analysts led by Todd Hagerman wrote on Dec. 20 that CMBS losses at Wachovia might reach $1 billion to $1.2 billion.
"Marks will increase further given the severe dislocations in the fixed income capital markets during the quarter, including materially wider CMBS credit spreads," the analysts wrote.
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