WaMu Cuts Jobs

April 8, 2008

Washington Mutual Inc, the largest U.S. savings and loan, said on Tuesday it obtained a $7 billion capital injection from private equity firm TPG Inc and other investors, but that mortgage problems will lead to a $1.1 billion quarterly loss and the elimination of 3,000 jobs.

The thrift also plans to close its 186 stand-alone home loan offices and stop offering home loans through brokers. It will instead offer mortgages through its retail branches, where some of the affected mortgage employees will be offered jobs, spokesman Derek Aney said. WaMu, as the thrift is known, said it expects a first-quarter loss of $1.40 per share, more than twice the 51 cents that analysts on average expected.

The Seattle-based thrift expects to set aside $3.5 billion in the quarter for loan losses, nearly twice what it previously projected, and said net charge-offs will total $1.4 billion. WaMu will also reduce its quarterly dividend per share to 1 cent from 15 cents, saving $490 million a year. The cut is the second in four months.

“These companies are getting serious,” said James McGlynn, a portfolio manager at Summit Investment Partners in Southlake, Texas. “They are bringing in capital, (and) getting out of businesses where they weren’t efficient. It just seems like they are getting their comeuppance.” Shares of WaMu fell 73 cents, or 5.6 percent, to $12.39 in morning trading. They had risen 29 percent on Monday, after news of the thrift’s plans to raise $5 billion first surfaced.

WaMu joined more than a dozen commercial and investment banks to seek cash from outside investors in the last year, following more than $200 billion of write-downs and credit losses tied to the nation’s housing and credit crisis.

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