A report issued Monday by investment bank UBS predicted Washington Mutual's losses from its mortgage business will be even worse than the...
A report issued Monday by investment bank UBS predicted Washington Mutual’s losses from its mortgage business will be even worse than the troubled lender’s own forecast.
The report helped send WaMu shares to their ninth straight daily loss and the second loss in a row of more than 10 percent.
UBS analyst Eric Wasserstrom estimated WaMu will lose about $21.7 billion from mortgages through 2011, versus the company’s forecast of $12 billion to $19 billion. Companywide, Wasserstrom predicted WaMu will lose $27 billion over the next four years.
WaMu stock Monday fell $1.28, or 17 percent, closing at $6.25. That followed a 12.5 percent loss Friday and brought the shares to their lowest level since May 1992 (after adjusting for splits).
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The Seattle lender’s stock has lost 34.2 percent over the past nine trading days.
While many financial stocks have been battered by the housing slump and credit crunch, WaMu has been hit harder than most. Its mortgage portfolio is heavy with subprime loans, adjustable-rate loans and home-equity loans — all categories that have seen especially high default rates.
In his report, Wasserstrom noted that about half of WaMu’s $184.4 billion mortgage portfolio dates from 2006 or later.
Industrywide, default rates tend to be highest on the more recent loans, reflecting looser credit standards.
Overall, Wasserstrom projected WaMu will lose about $4.1 billion on the 2005-and-earlier half of its mortgage portfolio, and $17.6 billion on the 2006-and-later half.
WaMu also faces future losses from $51 billion in undrawn balances on home-equity lines of credit, as well as from rising levels of credit-card charge-offs over the next year or two, Wasserstrom said.
He cut his 12-month price target on the stock to $8.50 from $11.
WaMu will report its second-quarter results in mid-July.
Drew DeSilver: 206-464-3145 or email@example.com