Lately equities analysts seem to be competing on who can make the most dire prediction for Washington Mutual’s future loan losses.
Reuters reports today that WaMu, as the company is known, may set aside as much as $30 billion in credit losses through 2011, predicts Lehman Brothers analyst Bruce Harting.
That tops the $27 billion of losses that UBS analyst Eric Wasserstrom on June 9 said the nation’s largest thrift could face.
According to Reuters, Harting’s more recent report says the thrift may need to widen its forecast loss on home loans from $12 billion to $19 billion for the next three to four years. Harting also sees losses on multi-family mortgages, commercial loans and credit card loans.
Harting says WaMu and other lenders face greater risks as home prices keep sliding.
Interestingly, Harting maintained his “equal weight” rating on the stock, which he sees hitting $10. (He previously thought it might hit $27). He thinks WaMu could become profitable again in 2010.
As I write this, the stock is down about 2 or 3 percent today to trade at less than $6. That is a fraction of its 52-week high of $44.
Bloomberg recently ran a story about David Dreman, the thrift’s ninth largest shareholder, saying the company should fire CEO Kerry Killinger and replace its board of directors.
His argument: Killinger must be held accountable for $3 billion in subprime-related losses so far. Killinger, 59, stepped down as chairman this month amid heavy criticism.
Washington Mutual did not immediately return my call for comment. But Bloomberg quoted Derek Aney, a spokesperson, as saying Killinger, as a director, received support of 88 percent of shareholders who voted at the company’s annual meeting in April.
Yet at the same meeting, investors voted to split the roles of CEO and chairman, rejecting the board’s recommendation.
The Washington Mutual story is hardly unique. It ramped up on subprime and other risky loans during the housing boom and is now bleeding money. The company said last week it halted loans that allow borrowers to defer interest and principal payments. That followed a previous shuttering of its subprime operations and a decision to halt loan sales via brokers.
Shareholders are scheduled to vote today on matters related to a $7 billion capital infusion from TPG Inc. and other investors, which was announced in April.
Related News:
- Downey, WaMu, Indymac plummet in thrift industry rankings
- UPDATE 1-Washington Mutual cuts 1200 jobs after big losses
- WaMu Bets on Blemished Borrowers With Credit Cards (Update1)
WaMu to cut 3,000 jobs nationwide, gets $7 billion infusion - FBI says SoCal has most mortgage fraud reports
- Foreclosure auction firms accused of “bait and switch”
- Mortgage markets could rebound in ‘09
- Feds launch SoCal mortgage scam squad
- Brooks to clients who lost money, I can’t pay
Perhaps Dreman should be fired for holding such a large position in a company with so much subprime exposure to the detriment of his own investors. WaMu’s option ARM business, subprime origination business (through the Long Beach Mortgage acquisition), and the fact that it was buying large blocks of subprime loans from Ameriquest and Argent were no secret to anybody.
Investors were perfectly happy with the way these businesses were being run as long as subprime was making money for everybody. Now, people don’t have enough fingers to point at everybody else.
Not only that, but I closed my checking account with them earlier this year. Their customer service has really gone down hill from when I opened the account about 10 years ago.
If you can get into a credit union, you should do it. Good service and non-profit status help prevent the hidden fees that banks extract.
Look what WAMU has done to the companies and shareholders they have ruined Ameican Savings, Great Western Bank and Home Savings of America what a shame
They’ve sure been bouncing my checks with a vengeance.
Yes, many value investors got suckered into thinking banks were a bargain because they were trading below their book values. But the book values were fictional.
Rather than trying to get Killinger fired, which wouldn’t do a thing to ameliorate WaMu’s toxic waste dump of bad loans, Dreman should sell his WaMu holdings and short the company instead.
Not a big surprise. Have seen the signs. However, I love my WaMu branch in Aliso Viejo. They hire mostly competent tellers and don’t charge me for wires, checking, or anything.
I had several incidents with WaMu that changed my image of them. The worst was dealing with their telephone bankers who may have been outsourced, but at any rate had marginal English speaking ability. They mistyped my new address into their system which led to a fiasco with my tax refund check being lost by the bank. I had to deal with the IRS to get a new check cut which I wouldn’t wish on anyone. Anyhow a couple other incidents happened that made me finally say NO MAS.
If people only knew how “dire” WAMU’s situation really is. A little digging into WAMU’s debt to asset ratios as well as their “reserves” would scare anybody.
Let’s just say that at any other period in American banking history, WAMU should have already been shut down and taken over by the Feds based on regulatory laws in effect. I predict a “merger” for WAMU.
When I lived in Seattle in the 1970’s Washington Mutual was a friendly, healthy, local bank. I don’t think they had a branch south of Tacoma back then. It seems to have grown into a slimy and unhealthy national monster, and I think the end for it is in sight.
You just wonder how these troubled banks will meet their end. Will there be backdoor deal made like the Bear Stearns thing? Or will there be a good old fashioned run on the bank, where even nice folks like Steph rush down to get their money out of the branch in Aliso Viejo?
WaMu is going nowhere but down as the real estate market continues to implode and more homes go into foreclosure. It’s just going to be interesting to see how WaMu meets its end. It’s not if, but when at this point for WaMu.
i withdrew my money from wamu last month.
Just got my stimulis check and the first thing I did was pay off my wamu credit card. They weren’t bad for the first two years but then they coming up with new reasons for interest rate hikes. Just hit 29.99 percent a couple a months ago. This story brings joy to my heart, may they rot in hell
I’m sticking by WAMU. My funds are insured. Thousands of people at IndyMac were put out of a job because of the run caused by Charles Schumer’s reckless mouth. Thousands more paid CD penalties because they bought into his hysteria (rather than recognizing that their funds were insured). Evidently this was the “prescriptive measure” Schumer had in mind. Like the OTS said, we’ll never know if IndyMac Bank would have survived or failed, absent the panic caused by Schumer. But at least the employees would’ve enjoyed longer employment and health insurance coverage, and the customers who pulled their CDs prematurely would’ve been spared the penalty consequences of overreaction. Some public servant, that guy.