Wachovia (WB): Wall Street LOVES Bob Steel and His Turnaround Plan

Judging from his note this morning, when Deutsche Bank analyst Mike Mayo isn’t analysing stocks, he’s sighing longingly at 8×10 glossies of Wachovia’s new CEO, Robert Steel. Mayo loves Steel’s turnaround plan, and is impressed by the job Steel has done so far to get the battered bank back on track:

We were impressed by the sell-side lunch w/ Wachovia’s new CEO, Bob Steel, who has so far taken action about as quickly as any new CEO, incl. initiatives around capital, expenses, and management… The meeting was a reminder that somebody does not become vice chairman of Goldman Sachs without strong leadership and financial skills.

In his first month as CEO, Mr. Steel has replaced the CFO and chief risk officer, taken actions to free up $1.5 bil. of expenses, and freed up capital by almost eliminating the dividend and reviewing assets for sale. We were also pleased that the CEO recognises the value of an est. $20 bil.-plus in retained capital through year-end 2009 as a cushion for its problems. In short, he seems to have the exact capital market skills that Wachovia needs for the next 1-2 years.

Mayo said that he was confident that Wachovia has “no plans to issue new capital, act as a distressed seller of the option ARM portfolio, or, in our view, take other actions that would reduce franchise value that seems so valuable relative to its stock price.” May maintains his “Buy” rating and reiterated his $30 target.

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