Wachovia Corp (NYSE: WB) led the US based banks posting dismal second quarter earnings as losses piled up related to the mortgage crisis and other debt the company failed to account for. The total loss for Wachovia was $8.86 billion according to Reuters which also reported Fifth Third Bancorp (NasdaqGS: FITB) and KeyCorp (NYSE: KEY) posted losses which have many bank customers wondering if their bank will be the next IndyMac.

Regions Financial Corp (NYSE: RF) and SunTrust Banks Inc (NYSE: STI) also posted losses. A SunTrust representative stated profit available to common stockholders fell 21 percent to $535.3 million, or $1.53 per share, from $673.9 million, or $1.89, a year earlier. Regions said net income fell 54 percent to $206.6 million, or 30 cents per share, from $453.3 million, or 63 cents, hurt by losses tied to home equity loans and homebuilders.

“The banking industry is suffering from the tail end effects of a burst housing bubble,” said Gerard Cassidy, an analyst at RBC Capital Markets. “While capital markets operations weren’t hit as badly as in the first quarter, what dominates results now is good, old-fashioned credit deterioration. We’re going to see more.”

The losses incurred by US banks have had an impact on the the Forex market and the value of the US dollar. Thomson Financial reported the US dollar has dropped against major currencies as a direct result of lackluster earnings results from Wachovia Corp. At 11:20 a.m. GMT, the euro was trading at $1.5938, having dropped to around $1.5907 at around 9:25 a.m. GMT. At 8:19 a.m. GMT, the euro had traded at around $1.5935.

What does all this mean to US consumers ? For investors with stock in Wachovia, either in their portfolio or as part of a mutual fund, it means that they can expect to share the pain with the 10,750 Wachovia employees who will lose their jobs as part of a turnaround plan. Other investors will feel the pain of Wachovia cutting their quarterly common stock dividend to 5 cents per share following a May dividend cut to 37.5 cents per share from 64 cents.

“These bottom-line results are disappointing and unacceptable,” says Lanty Smith, Wachovia’s chairman. “While to some degree they reflect industry headwinds and weaker macroeconomic conditions, they also reflect performance for which we at Wachovia accept responsibility. Our company is facing up to these issues, is addressing the challenges head-on and has redirected near-term strategic priorities.”.

Tagged : Wachovia, SunTrust, KeyCorp, Fifth Third, Regions