Wachovia Chief on the Hot Seat

Wachovia's remaining exposure to CDOs totaled $676 million at the end of October, compared to $1.8 billion the month before, it said Friday. The bank's other exposure to subprime mortgage-backed securities totaled $2.1 billion at the end of the month, approximately the same as it was in September.

The bank attributed the "rapid declines in valuations" of CDOs during October to rising defaults and delinquencies in subprime residential mortgages as well as rating agencies' downgrades of a large number of subprime mortgage-related securities in October.

In the latest filing, Wachovia also says it bumped up the extra cash it has to sock away for loan losses. It boosted that provision to a range of $500 million to $600 million in the fourth quarter, up from the $408 million it set aside in the three months that ended Sept. 30, according to the filing.

Wachovia had already reported a $1.3 billion writedown in the third quarter. That included $347 million of subprime-related valuation losses on asset-backed securities and collateralized debt obligations, it said.

Still, most analysts seem to believe the pain is far from over at Wachovia.

"While the company provided sufficient information to quantify CDO exposure, higher credit losses will likely persist into 2008," writes Gary Townsend, an analyst with Friedman Billings Ramsey, who cut his rating to the equivalent of a sell. "We expect that the shares will remain under pressure until real estate markets and nonperforming asset levels stabilize."