WaMu reports $1.14 bln quarterly net loss; closes $7 bln deal

Apr.15, 2008 in Market Outlook

WaMu reports $1.14 billion quarterly net loss

Lender sets aside $3.51 bln of provisions; finance committee director resigns

By Alistair Barr, MarketWatch

Last Update: 6:48 PM ET Apr 15, 2008

SAN FRANCISCO (MarketWatch) — Washington Mutual Inc. reported a $1.14 billion
first-quarter net loss late Tuesday as the lender suffered from the mortgage
meltdown and broader credit crunch.

Mary Pugh, chairwoman of the lender’s finance committee, resigned and the
company’s chief executive said credit costs will be taken into account when
determining executive pay this year.

Pugh had been criticized by some investors and corporate governance groups for
letting WaMu become too exposed to the exotic mortgages that are now hammering
the lender.

CtW Investment Group, which advises institutional investors such as pension funds
on corporate governance, welcomed Pugh’s departure.

“Shareholders at Washington Mutual sent an unequivocal message today that they
are ready for more independent and accountable directors,” CtW executive director
William Patterson said in a statement. “We commend Washington Mutual’s board for
promptly accepting Ms. Pugh’s resignation and urge them to also demand the
resignation of any other directors who fail to win majority shareholder support.”

The Seattle-based company also said it closed a previously announced deal to
raise $7 billion from a group of investors led by private-equity firm Texas
Pacific Group. It also reported “steady” results from its retail banking, credit
card and commercial businesses.

WaMu shares edged 28 cents higher to $10.60 in after-hours trading on Tuesday.
The stock gained 3% during regular trading.

WaMu said it lost $1.14 billion, or $1.40 a share, in the period, vs. net income
of $784 million, or 86 cents a share, during the first quarter of 2007.

The company (WM) set aside $3.51 billion of provisions to cover potential loan
losses as the economy weakens and home values continue to slide. That’s more than
double the amount the lender set aside in the fourth quarter of 2007.

WaMu grew quickly from a small thrift into one of the largest mortgage lenders in
the U.S. But when housing prices started falling and delinquencies and
foreclosures soared last year, the company was hit hard, losing 70% of its market
value.

WaMu still has a valuable retail banking business, so the lender was considered
an acquisition target. However, the company unveiled a different deal last week,
agreeing to sell new shares and convertible securities to Texas Pacific and other
investors for $7 billion.

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