Aug. 11 (Bloomberg) -- Wachovia Corp., the fourth-largest U.S. bank, said its second-quarter loss was bigger than reported in July because of costs to settle a probe of auction-rate securities sales. It also increased planned job cuts.

The bank revised the loss to $9.11 billion, or $4.31 a share, from $8.86 billion, or $4.20 a share, according to a regulatory filing today. The Charlotte, North Carolina-based bank now plans to dismiss 6,950 employees later this year, 600 more than previously disclosed. The new job cuts will come from Wachovia's mortgage operations, spokeswoman Christy Phillips Brown said.

Chief Executive Officer Robert Steel, a former Treasury official, last month replaced Kennedy Thompson, whose $24 billion purchase of Golden West Financial Corp. in 2006 saddled Wachovia with adjustable-rate home loans as the housing market peaked. Steel is hiring new chief finance and risk officers and cutting back the company's main mortgage operations to states where it operates deposit-taking offices.

``At this point Bob Steel wasn't part of the problem so he has nothing to hide,'' said Nancy Bush, an independent bank analyst in Aiken, South Carolina. ``He has everything to gain by putting it all out on the table and saying this is how bad it is and it might get worse.''

The revision marks the second straight quarter that Wachovia updated its results to show a bigger loss. This time, the wider gap resulted from a $500 million addition to legal reserves made after the July 22 report. Missouri state officials said today they're making progress in talks with Wachovia on how to resolve the investigation.

Job Cuts

Auction-rate securities are typically bonds whose interest rates are reset by periodic bidding. Investors were left unable to redeem securities that were billed as equivalent to cash after the dealers that ran the bidding in February suddenly stopped supporting the market as they had for years. Wachovia Securities is based in the Missouri city of St. Louis.

Wachovia retail brokerage clients held $8.7 billion in auction-rate securities as of August 1, down from $13 billion on March 31, the company said in today's filing.

The bank said the job eliminations are part of an expense- cutting effort aimed at preserving $1 billion in capital. The bank isn't filling another 4,400 open positions and cutting $350 million in previously planned capital spending. The company's investment banking unit shrank in the past year by 478 jobs, or 7 percent, to 6,394 employees in the second quarter.

Wachovia said Aug. 8 it plans to cut 125 jobs as it ends direct mortgage lending in 19 states, mostly in the central and northwest regions of the U.S. Wachovia bank employees will still make home-equity and 30-year fixed-rate loans in three of those states, while its mortgage unit will offer a variety of loans in 15 other states where it has bank branches.

Wachovia listed more than 120,000 employees at the end of the first quarter.

The bank rose 28 cents to $18.21 at 4:15 p.m. in New York Stock Exchange composite trading.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: August 11, 2008 18:22 EDT