Wachovia opens lower on Oppenheimer downgrade

Shares of Wachovia opened 12 percent lower on news that an Oppenheimer analyst cut her rating on the bank from perform to underperform.

In her explanation, Meredith Whitney questioned the timing of Wachovia’s decision to cut its mortgage portfolio.  She believes the company’s loan portfolio has been cut by $50 billion in the second quarter alone and that shrinking their business will make it difficult to generate revenues.

In 2006, Wachovia purchased Golden West Financial and inherited $121 billion in option adjustable rate mortgages.  These risky mortgages allow homeowners to choose their payments.  Many chose lower payments in the short term and after the rates reset, they defaulted on the loans.

Ms. Whitney went on to predict that Wachovia will post full year losses for both 2008 and 2009.

Shares of Wachovia have lost over 80 percent of their value in the past year, but have recovered this morning’s losses.  Shares are trading right around yesterday’s closing price of $9.84 heading into the late afternoon.