By Jonathan Stempel

NEW YORK (Reuters) - Wachovia Corp, battered by mounting losses from mortgages and other debt, said on Thursday Chief Executive Ken Thompson had given up the chairman's title to focus on day-to-day operations at the fourth-largest U.S. bank.

Lanty Smith, a director since 1987 and lead independent director since 2000, was named non-executive chairman.

Thompson will remain on the board of directors, and be responsible for management of the Charlotte, North Carolina bank. He will also retain the title of president. The board approved the change today, a Wachovia spokeswoman said.

Wachovia announced the change after a difficult month in which it cut its dividend, reported a first-quarter loss that it later nearly doubled to $708 million, and faced up to $1.14 billion of costs for legal and regulatory problems.

Mounting loan losses also helped push Wachovia last month to raise $8.05 billion of capital. Meanwhile, a Wall Street Journal report said federal prosecutors are investigating Wachovia in a probe related to alleged laundering of drug proceeds.

"Wachovia has faced a litany of negative announcements," said Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners LP in New York, who has a "hold" rating on the bank. "The board may be taking a more hands-on approach to getting Wachovia through this environment rather than just rely on Ken Thompson."

In a statement, Thompson said the change frees him "to focus 100 percent of my time and attention on guiding the company through the current environment and building and delivering enhanced value." Wachovia said the change also enhances corporate governance.

Thompson has been chief executive since April 2000, and had been chairman since February 2003.

He has admitted to poor timing in buying California mortgage lender Golden West Financial Corp for $24.2 billion in 2006. Losses from "option" adjustable-rate mortgages that let borrowers pay less than the interest due helped cause nonperforming assets to more than quadruple from a year earlier to $8.37 billion.

Smith is chairman and chief executive of Tippet Capital, a merchant banking firm based in Raleigh, North Carolina. He was previously a partner at law firm Jones Day.

Wachovia shares closed on Thursday down 88 cents at $27.83 on the New York Stock Exchange. They have fallen 51 percent in the last year.

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