India | UK | US

Washington Mutual shares sink below $2 on capital worry

Posted : Thu, 11 Sep 2008 16:33:41 GMT
By : Reuters
Category : US (Business)
News Alerts by Email ( click here )
US Business News | Home
By Jonathan Stempel

NEW YORK (Reuters) - Washington Mutual Inc shares sank below $2 for the first time since 1990 as anxiety grew about the largest U.S. savings and loan's mortgage losses, capital needs and survival prospects.

Its shares were down 17 cents, or 7.3 percent, at $2.15 on Thursday on the New York Stock Exchange, but fell to $1.75 earlier in the session. The stock has plunged 44 percent in the previous two days.

Wall Street is worried that Washington Mutual, like Lehman Brothers Holdings Inc , may not have time to right itself, and that new the chief executive, Alan Fishman, will not find a buyer or raise enough capital for the Seattle-based thrift.

Washington Mutual has said mortgage losses could reach $19 billion through 2011. The company, with $309.7 billion in assets, raised $7 billion earlier this year from investors, led by private equity firm TPG Inc . But the falling stock price could make further capital raising prohibitively expensive.

"Unfortunately, their options have narrowed significantly, even over the past two days," Sean Egan, manager of the ratings desk at Egan-Jones Ratings Co, said in an interview.

"What is ideal is an investment well in excess of $10 billion, probably closer to $15 billion or $20 billion, with the hope of additional investments over time," he added. "Few investors can write a ticket that large, and even fewer have the ability to move quickly."

Egan-Jones, in a report, called "solvency" the "major issue" for the thrift.

Washington Mutual spokesman Brad Russell declined to comment.

Fishman is a former chief executive of Brooklyn, New York's Independence Community Bank Corp, which was bought by Sovereign Bancorp Inc in 2006.

He became Washington Mutual's chief executive Monday, replacing Kerry Killinger, who was ousted by the board after 18 years at the helm. The 52-week high for Washington Mutual shares is $39.25, set last September 19.

REGULATORY SCRUTINY

Washington Mutual said this week it entered into a memorandum of understanding with its main regulator, the Office of Thrift Supervision (OTS), to improve risk management. It said the agreement does not require new capital or bolstered liquidity.

Richard Bove, a Ladenburg Thalmann & Co analyst, suspended his "neutral" rating on Washington Mutual Thursday, citing uncertainty about what the OTS ordered the thrift to do.

OTS spokesman William Ruberry said: "We are fully aware of the situation, and we are monitoring it."

Last quarter, Washington Mutual lost a record $3.33 billion, including a loss in its credit card unit, which the thrift created in 2005 when it bought card issuer Providian Financial Corp, which served people with imperfect credit.

Analysts have said Washington Mutual may also be starved for buyers because of an accounting rule that will be effective in December. The rule will force buyers to write down assets of targets to market prices, perhaps requiring them to raise costly capital.

JPMorgan Chase & Co is said to have approached Washington Mutual early this year about a merger, but Killinger rejected the overture.

It's unclear how customers are reacting.

Fishman said Monday there had been "no dramatic movements" in deposit flows at Washington Mutual. The thrift ended June with $181.9 billion in deposits.

Egan said: "There has to be concern about how well WaMu can retain its deposit base, which is the lifeblood of the institution."

It cost $4.45 million up front plus $500,000 annually to protect $10 million of Washington Mutual debt against default for five years, Markit Intraday said Thursday. The upfront payment edged down from $4.53 million on Wednesday.

(Additional reporting by Dena Aubin in New York and John Poirier in Washington, D.C., editing by Maureen Bavdek/Jeffrey Benkoe)


(c) Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.

Share/Save/Bookmark

Article : Washington Mutual shares sink below $2 on capital worry
Print this article
Email this article

Stay Updated
News gadget on your Google homepage
Subscribe to a news feed in Google Reader


Related News

FDIC: 'Problem' banks at 16-year high in US
Washington - The number of US banks in danger of collapse has risen to the highest level in 16 years, a government regulator reported Tuesday in a sign that the country's worst financial crisis in decades is still lingering. The Federal Deposit Insur...

American shoppers lace up racing shoes for Black Friday
Los Angeles - Up to 134 million Americans are expected to splash out with their cash when the holiday shopping season kicks off on traditional Black Friday. The National Retail Federation Tuesday said it anticipated that the easing recession will sen...

US stocks edge lower on revised growth figures
New York - US stocks fell slightly on Tuesday as government figures showed that last quarter's economic rebound was smaller than initially thought. The Commerce Department in an updated estimate said the economy grew at an annual rate of 2.8 per cent...

US economic rebound smaller than thought; Fed optimistic - Summary
Washington - The US economy's rebound from a deep recession was smaller than initially thought, according to new government figures Tuesday, while the Federal Reserve said it expects the country's recovery to pick up...

EXTRA: US central bank issues rosier outlook on economy
Washington - The Federal Reserve Tuesday raised its growth forecasts for the US economy, but warned that unemployment in the United States will remain for some time at its highest levels in a generation. The US central bank projected the world's larg...

US levies first-ever fines on airlines who stranded passengers
Washington - Three US airlines were fined a total of 175,000 dollars on Tuesday for leaving passengers stranded nearly six hours on an aircraft, the first-ever such penalty imposed by the US government. Continental Airlines and ExpressJet Airlines we...

US economy grew 2.8 per cent in third quarter - Summary
Washington - The US economy grew at an annual rate of 2.8 per cent in the third quarter of this year, according to an updated government estimate Tuesday that confirmed the United States has likely emerged from its deepest recession in decades. But t...

Have your Say
Name
Email
Subject
Your Comment

Enter Verification code
 
  

 

 

More US (Business) News click here
Follow The Earth Times
Subscribe to RSS Follow Earth Times on TwitterNews by email
Share/Save/Bookmark

 
 



 
Subscribe to free Earthtimes
News Alerts by Email Click here
For RSS Feeds Click here
or Create your own RSS

Add to Google Toolbar
Breaking News
Press Releases

 


The Earth Times
News Category

© 2009 www.earthtimes.org, The Earth Times, All Rights Reserved | Privacy Policy
Earth Times accept no responsibility or liability either directly or indirectly for views or opinions expressed in articles or comments.