Days after securities regulators raided the St. Louis headquarters of Wachovia Securities as part of a broad investigation into questionable practices involving auction rate securities, the bank posted a $9 billion Q2 loss tied to mortgage loans

NEW YORK -- Wachovia Corp, the fourth-largest U.S. bank, on Tuesday posted an $8.86 billion second-quarter loss, slashed its dividend and announced 6,350 job cuts after losses tied to mortgages soared.

Its shares fell $1.67, or 12.7 percent, to $11.51 in premarket trading.

The net loss for the Charlotte, North Carolina-based bank equaled $4.20 per share, and compared with a profit of $2.34 billion, or $1.22, a year earlier.

Excluding items, the loss was $1.27 per share, compared with the average analyst estimate of $1.30, according to Reuters Estimates.

"These bottom-line results are disappointing and unacceptable," Chairman Lanty Smith said in a statement. "While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility."

Results included a $6.06 billion write-down of goodwill and reflected a $4.19 billion increase in reserves for bad loans.

They also included a $975 million charge related to its tax treatment of leveraged leases, $936 million of losses tied to disrupted capital markets, a $590 million charge for other legal matters, and $391 million of losses on securities sales.

Wachovia slashed its quarterly dividend 87 percent to 5 cents per share from 37.5 cents, and has now lowered it 92 percent this year.

JOB CUTS

The job cuts will affect more than 5 percent of the bank's roughly 120,000 employees. Wachovia also said it will eliminate 4,400 jobs and contracting positions that are now open.

Wachovia said it cut 2,000 jobs at its retail mortgage operations through June, and plans to eliminate 4,400 more in the next year.

The bank ended the quarter with a Tier 1 capital ratio, which measures its ability to cover losses, of 8 percent. Regulators consider 6 percent sufficient. Wachovia raised $8.05 billion of capital in April.

Wachovia on July 9 had projected a $2.6 billion to $2.8 billion quarterly loss, equal to $1.23 to $1.33 per share, excluding goodwill items.

The same day, it named former Treasury Undersecretary Robert Steel as chief executive, replacing Ken Thompson, whom it ousted a month earlier.

Steel will try to unload troubled assets following Wachovia's disastrous $24.2 billion purchase in October 2006 of Golden West Financial Corp, a specialist in option adjustable-rate mortgages.

"In the short term, the entire organization is focused on protecting, preserving and generating capital, reinforcing Wachovia's strong liquidity position, and reducing risk," Steel said.

MORTGAGE LOSSES

Wachovia's increase in loan loss reserves included $3.3 billion related to the "Pick-a-Pay" mortgages in which Golden West specialized, and which enticed Wachovia to buy Golden West in the first place.

The bank has since stopped making those loans, and on Monday said that this week it will stop offering home loans through brokers.

Wachovia is setting aside $10.96 billion for credit losses, up from $6.77 billion in the first quarter and $3.55 billion a year earlier Net charge-offs increased more than eight-fold from a year earlier to $1.31 billion.

The corporate and investment banking unit had a $209 million profit, down 73 percent, reflecting write-downs tied to subprime mortgages, commercial mortgages, non-subprime debt and consumer mortgages.

Profits in consumer and business banking, Wachovia's largest unit, fell 23 percent to $1.12 billion.

Capital management profit fell 5 percent to $297 million, hurt by the liquidation of an Evergreen Investments fund, while wealth management profit rose 9 percent to $98 million.

Through Monday, Wachovia shares had plunged 65 percent this year, compared with a 30 percent drop in the KBW Bank Index.

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