(Recasts; adds analyst comments, background; updates share price details)
By Tenzin Pema
BANGALORE, June 19 (Reuters) - U.S. bank Wachovia Corp WB.N, which is the subject of takeover speculation after a series of missteps, is unlikely to raise more capital in the near-term and makes a "uniquely attractive" merger partner, according to an analyst at Deutsche Bank.
The company's stock price is over 50 percent lower than its estimated franchise value of $39.54, analyst Mike Mayo said in a note to clients.
"We mention the takeover possibility solely based on the experience of past companies that have traded at big discounts to their franchise values," Mayo said.
"This type of discount is extremely unusual. JPMorgan Chase & Co (JPM.N) has indicated that it wants to pursue retail banking transactions in the Southeast, and Wachovia is twice as big as the next largest independent regional bank in the region (SunTrust Banks Inc (STI.N))," Mayo said.
Wachovia earlier this month ousted Chief Executive Kennedy Thompson, a move that raised speculation that the bank could become a takeover target.
"A new CEO could be a positive catalyst," Mayo said. Alvaro de Molina, GMAC Financial Services' chief executive officer and former chief financial officer at Bank of America Corp (BAC.N), would be a good fit, the analyst said.
"We assume that he (Molina) would want it and, if he did not, would hope that Wachovia would find a way to help change his mind," Mayo said.
Wachovia could feel a need to quicken its CEO search process, given the lack of permanent leadership, continued deterioration in mortgage markets, the significant decline in the stock price, as well as the uncertainty surrounding the company, Mayo said.
The company has posted $5.3 billion of market-related write-downs since last summer, while its share price has plunged 68 percent over the past year.
In April, the company raised $8.05 billion of capital and slashed its dividend 41 percent after a surge in losses tied to its portfolio of option adjustable-rate mortgages.
Mayo estimates that Wachovia has raised $4 billion more than the capital needed.
Since the last capital raise, Wachovia had an unexpected charge that cost the bank $1 billion. But it still has $3 billion in excess, or enough to absorb $5 billion of pretax losses on loans or other areas, the analyst said.
Mayo cut his 2008 and 2009 profit estimates on Wachovia to reflect expectations of higher losses on mortgage loans.
He now sees total loan losses of $28 billion at Wachovia.
The analyst cut his 2008 earnings outlook to $1.15 a share from his prior forecast of $2.00 per share. He cut his 2009 earnings estimate to $2.75 per share from $3.00 a share.
Mayo reduced his price target on the stock to $30 from $35, but continues to rate it "buy."
Shares of Charlotte, North Carolina-based Wachovia were up almost 1 percent at $17.02 in afternoon trade Thursday on the New York Stock Exchange. (Editing by Pratish Narayanan)