Moody's drops Wachovia

Moody's Investors Service said it downgraded its ratings on Wachovia Corp. (senior debt to A1 from Aa3) and on its lead bank, Wachovia Bank NA (financial strength rating to B from B+ and long-term deposits to Aa2 from Aa1).

Wachovia's Prime-1 short-term ratings were affirmed, the agency said, adding that Wachovia Bank's deposit and debt ratings benefit from a one notch lift because Moody's said it believes the bank enjoys high systemic support.

Following the downgrade, Moody's said it said it maintained a negative outlook on Wachovia's ratings.

Moody's said that the downgrade and negative outlook were driven mainly by a sizable increase in its loss expectations on Wachovia's $122 billion adjustable-rate-mortgage portfolio.

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