Washington Mutual today reported a second-quarter net loss of $3.33 billion and increased its loan loss reserves by $3.74 billion to $8.46 billion.
Washington Mutual today reported a second-quarter loss of $3.33 billion, largely due to the $5.91 billion it set aside to cover the future cost of bad loans.
The loss equated to $6.58 a share, far exceeding Wall Street’s most pessimistic predictions, and was three times the loss WaMu posted in the first quarter.
In the second quarter of 2007 — the last quarter before the teetering U.S. mortgage market began to topple over — WaMu reported an $830 million profit.
In a phone interview with The Seattle Times, WaMu chief executive Kerry Killinger said the company is deliberately building up its loan-loss reserves; they now stand at $8.46 billion.
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“We are doing loan-loss provisioning significantly in excess of the actual losses,” Killinger said, noting that WaMu charged off $2.17 billion in bad loans in the second quarter. This should be the peak year for loan-loss provisioning, he said — though not necessarily for loan losses themselves.
All told, he said, the company expects its total home-loan losses to be near — but not over — the $19 billion it estimated three months ago, when it raised $7.2 billion in new capital from investors.
“We believe we have sufficient capital to see us through even a ‘stress situation’ in real estate,” he said.
About $3.24 of the $6.58-a-share loss was due to the conversion of preferred stock issued as part of the April refinancing into WaMu common stock.
Seattle-based WaMu released its results after the close of regular New York Stock Exchange trading. Its shares, which gained 34 cents in regular trading to close at $5.82, traded even higher after hours, to around $6.07 per share.
Drew DeSilver: 206-464-3145 or email@example.com