Wachovia

(WB) - Get Report

chief executive Ken Thompson may be the next CEO brought down by Wall Street's mortgage binge.

So says analyst Dick Bove of Punk Ziegel & Co. Bove, who rates the stock market perform, says Thompson was among the most aggressive executives in pushing his bank to take on more risk as it delved deeper into the world of nontraditional mortgages.

Wachovia didn't comment, but Bove's remarks come on the heels of a regulatory filing in which the Charlotte, N.C., bank said it plans to take a $1.1 billion writedown on collateralized debt obligations that are backed by subprime residential mortgage-backed securities.

In taking big losses, Wachovia follows in the footsteps of

Citigroup

(C) - Get Report

,

Merrill Lynch

(MER)

and

Morgan Stanley

(MS) - Get Report

, each of which took multibillion-dollar bad debt writedowns in recent weeks.

The big-dollar bungling has already cost Merrill Lynch's Stanley O'Neal and Citigroup's Charles Prince their CEO posts. Bove says Thompson is vulnerable because Wachovia, like Merrill and Morgan Stanley, moved aggressively into riskier mortgages in the last stages of the recent housing boom.

He points out that Wachovia bought residential mortgage lender Golden West in late 2006 -- a deal that Deutsche Bank analyst Mike Mayo warned came at "the wrong time of the cycle." The housing market peaked in 2005, by most economists' estimates, and has since gone into a free fall that the Federal Reserve believes will continue at least well into 2008.

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."

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.