Wachovia Chief on the Hot Seat

Don Truslow, Wachovia's chief risk officer, didn't paint a prettier picture for investors at a conference Friday hosted by the BancAnalysts Association of Boston. "We are seeing certain markets in the consumer residential mortgage portfolio deteriorate very quickly," he said. "We've got a pretty intense effort to really drill into local markets to get a better handle on how things are changing."

The company is seeing more higher-quality borrowers "walk away" from their home loans, Truslow added. "This is something we're beginning to see in [some] markets and we're trying to get our arms around that," he said.

"As we see it, Wachovia will have to cut expenses sharply to meet even the drastically reduced 2008 expectations," writes Jefferson Harralson, an analyst at Keefe Bruyette & Woods, in a note. He currently rates Wachoiva outperform.