WaMu has $3.33B loss, may be cut to "junk"
Washington Mutual has had another miserable quarter. This isn't surprising since a significant portion of their revenues are from mortgage loans. What is surprising is that they haven't undertaken to refinance some of these loans rather than write them down. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
The most appalling news is that WaMu reported that CEO Kerry Killinger, <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />COO Steve Rotella and CFO Tom Casey will not receive incentive payments they were due to receive under their bonus plan. This is supposed to make their customers who are losing their homes (and shareholders) feel better?
On a more positive note Bush finally caved on the proposed Housing Bill, which will provide support for both homeowners and Fannie Mae and Freddie Mac. The most impressive part of the Bill is the $300B that will be allocated to refinance at-risk loans and convert them to more affordable 30 year loans. Lenders must voluntarily agree to reduce the principal on the loans to 85 percent of their current value. Given the difficulty lenders like WaMu are having they should jump at the opportunity. The fund is expected to help keep up to 400,000 homeowners in their homes which could have a significant impact on the stability of the economy.
NEW YORK (Reuters) - Washington Mutual Inc, the largest U.S. savings and loan, posted a $3.33 billion second-quarter loss on Tuesday as souring mortgages forced it to set aside more money for loan losses.
The thrift's deteriorating health prompted Moody's Investors Service to say it may downgrade Washington Mutual to "junk" status. Shares of Washington Mutual fell in after-hours electronic trading.
Washington Mutual said its third straight quarterly loss was $3.34 per share, more than triple the $1.09 per share loss that analysts on average expected according to Reuters Estimates. Year-ago profit was $830 million, or 92 cents per share.
The net loss was $6.58 per share including a one-time adjustment tied to the thrift's $7.2 billion capital raising in April from private equity firm TPG Inc and other investors.
Seattle-based Washington Mutual said its retail banking, mortgage and credit card units all lost money in the quarter. The thrift set aside $5.91 billion for loan losses, and said net charge-offs totaled $2.17 billion.
It has been one of the hardest hit among the largest U.S. lenders in the nation's housing and credit crisis.