(Adds details, background, share movement)
Nov 9 (Reuters) - Friedman Billings Ramsey cut Wachovia Corp WB.N to “underperform” from “market perform,” based on the company’s disclosure of rapidly deteriorating residential mortgage credit metrics and continued write-downs.
Analyst Gary Townsend also halved his fourth-quarter earnings estimate to 50 cents a share from $1 a share. He cut his 2008 profit estimate to $4.08 from $4.60 a share.
Shares of the fourth-largest U.S. bank touched a new year-low of $38.05, before pulling back some of the losses to trade down almost 3 percent at $39.20 in morning trade on the New York Stock Exchange.
Wachovia on Friday said it incurred about $1.1 billion of losses in October on mortgage securities on top of a $1.3 billion write-down during the third quarter.
Charlotte, North Carolina-based Wachovia joined a growing list of financial companies — including Citigroup (C.N), Merrill Lynch & Co Inc MER.N and Morgan Stanley (MS.N) — that have reported losses from worsening conditions in consumer credit and capital markets.
FBR’s Townsend cut his price target on the stock to $35 from $47, and said Wachovia’s mortgage exposure and deteriorating credit trends will cause the shares to trade at a discount to peers.
Shares of Wachovia trade 9.14 times forward earnings, lagging peers Citigroup, Bank of America (BAC.N) and Wells Fargo (WFC.N), which are at a multiple of 13.86, 9.82 and 11.66, respectively. (Reporting by Shamik Paul, Nivedita Gupta in Bangalore; Editing by Pratish Narayanan)