WaMu posts Q2 2008 loss of $3.33 Billion
July 22 2008
Washington Mutual Inc said Tuesday after the markets closed that it swung to a loss in the second quarter, as it significantly increased its loan loss reserves in response to continued declines in housing prices throughout the U.S.
The largest U.S. savings and loan reported a net loss for the second quarter of $3.33 billion or $6.58 per share, compared to net income of $830 million or $0.92 per share for the year-ago quarter.
Results for the most recent quarter include a previously disclosed one-time earnings per share reduction in the amount of $3.24 related to the company’s capital issuance in April. Excluding the one-time reduction, the company’s second quarter loss per share was $3.34.
On average, 12 analysts polled by First Call / Thomson Financial expected the company to report a loss of $1.05 per share for the second quarter.
Net interest income for the second quarter increased to $2.30 billion from $2.03 billion in the prior year quarter, driven by higher net interest margin.
The company’s net interest margin, a measure of the difference between borrowing costs and lending rates, grew to 3.22% from 2.91% a year earlier and 3.05% in the first quarter.
Provision for loan losses for the second quarter totaled $5.9 billion, up $3.51 billion in the first quarter and up from $372 million in the second quarter of last year. The increase in provision for loan losses reflected the further decline in house prices which increased expected loss severities, increased delinquencies, reduced availability of credit and the weakening economy.
The percentage of net charge-offs, loans it doesn’t think are collectable, rose to 3.59% from 0.5% a year earlier and 2.24% in the first quarter. Nonperforming assets rose to 3.62% of total assets from 1.29% a year earlier and 2.87% in the first quarter.
Non-interest income for the quarter fell to $561 million from $1.8 billion a year ago, reflecting further market stress and restructuring of home loans business.
The company’s retail lending group posted a net loss of $2.0 billion, compared to a profit of 565 million in the same quarter last year.
Card services group reported a loss of $175 million on a managed basis, compared to a profit of $133 million a year ago.
The company’s commercial group reported a profit of $87 million for the second quarter, up from $122 million last year. Loan volume of $3.77 billion was up 33% from the prior quarter but was down 13% from a year ago.
The company’s home loans group posted a loss of $1.3 billion for the second quarter, compared to a loss of $40 million in the second quarter of last year. Home loans segment dropped to $8.46 billion in the second quarter from $35.9 billion a year earlier and from $13.8 billion in the first quarter. The decrease in volume reflected the company’s decision to exit wholesale lending and close all remaining home loan centers.