US banking group Wachovia swung sharply into the red in the second quarter with a loss of $8.9 billion, or net loss of $4.20 a share, including a $6.1 billion write-down connected to market losses. The loss stands in stark contrast to a $2.34 billion net earnings figure for the same period last year.

Meanwhile, the North Carolina-based bank said it would slash its dividend to just 5 cents a share, due on 15 September, down from 37.5 cents per cent share paid on 16 June in a bid to save about $700 million of capital a quarter.

The bank, which like a number of its peers has announced heavy losses in the latest quarterly reporting period, said earnings at its wealth management arm, however, rose by 9 per cent compared to the same quarter of 2007 to $498 million on 6 per cent revenue growth. Net interest income rose by 11 per cent on loan growth of 10 per cent.

For the group overall, the results were “disappointing and unacceptable”, Lanty Smith, Wachovia’s chairman, said. “While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility.”

As well as the dividend cut, Wachovia said it will quit the wholesale business of originating mortgages. As a result, about 1,000 Wachovia mortgage origination staff are being redeployed through the firm to help customers refinance and restructure mortgages.

“In the short term, the entire organisation is focused on protecting, preserving and generating capital; reinforcing Wachovia’s liquidity position; and reducing risk,” said Robert Steel, chief executive and president. Mr Steel was appointed to his post on 9 July.

“Our balance sheet and liquidity position are strong and we are committed to keeping them that way. The actions and initiatives under way are expected to generate or preserve more than $5 billion of capital,” Mr Steel said.

Wachovia had a Tier 1 capital ratio of 8 per cent at the end of the second quarter, he added.