The Wall Street Journal-20080118-WaMu- Caught in Mortgage Turmoil- Posts Big Loss
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WaMu, Caught in Mortgage Turmoil, Posts Big Loss
Washington Mutual Inc., a huge thrift being battered by the mortgage meltdown, reported a $1.87 billion loss in the fourth quarter that was fueled by a sharp increase in the reserve for loan-related losses.
Analysts and investors had braced themselves for dismal results, but WaMu executives offered little optimism that a rebound is coming soon. The Seattle company is exposed to some of the hardest-hit housing markets in the U.S., including California and Florida. Now problems are spreading to credit cards and other types of loans, resulting in expectations by WaMu for rising loan chargeoffs.
Several regional banks also reported quarterly results that were worse than a year earlier, including First Horizon National Corp. and PNC Financial Services Group Inc. BB&T Corp. saw its fourth-quarter profit surge because of year-earlier charges.
Kerry Killinger, WaMu's chief executive, said the latest quarter was his most difficult since moving into the top job in 1990. He brushed aside suggestions that he should step aside as a result of WaMu's problems. Mr. Killinger's push into subprime lending backfired, resulting in large write-downs and losses that have halted WaMu's momentum. "On a personal level, I've been through a lot with this company," Mr. Killinger said.
In a conference call with analysts, Mr. Killinger said he had asked WaMu directors not to award him a cash bonus for 2007. Such bonuses will be reduced by as much as 75% for other executives.
As expected, the latest quarter included a loan-loss provision of about $1.5 billion, up from $816 million in last year's fourth quarter.
WaMu released its results after the end of regular trading. In 4 p.m. New York Stock Exchange composite trading, WaMu shares fell 93 cents, or 7%, to $12.46. WaMu shares are down 72% in the past year.
Separately, shares of First Horizon of Memphis, Tenn., fell 13% after the bank reported a big jump in its provision for bad loans and said it lost $248.6 million, or $1.97 a share, in the fourth quarter, compared with profit of $76.5 million, or 60 cents a share, a year earlier. The company said the higher provisions "reflect inherent losses within the national construction portfolios."
Pittsburgh-based PNC Financial reported that fourth-quarter net income slumped 53% to $178 million, or 52 cents a share, down from $376 million, or $1.27 a share, a year earlier due to charges.
