Originally published Thursday, January 18, 2007 at 12:00 AM
Mortgage losses put pressure on WaMu
Seattle-based Washington Mutual said Wednesday the sale of a business unit helped push its fourth-quarter profit up 22 percent, even as...
Seattle Times business reporter
Seattle-based Washington Mutual said Wednesday the sale of a business unit helped push its fourth-quarter profit up 22 percent, even as it struggled with a slowdown in the national housing market.
WaMu reported a profit of $1.06 billion, or $1.10 a share, up from $865 million, or 85 cents a share, a year ago.
The company said it benefited from an after-tax gain of $415 million on the Dec. 31 sale of its WM Advisors asset-management unit to Principal Financial Group.
The gain more than offset expenses from cost-cutting efforts.
But results disappointed investors, and WaMu shares fell 48 cents in after-hours trading to $43.25.
The company released its results after the close of U.S. markets.
WaMu said its retail banking and credit-card businesses performed well in the quarter, despite a difficult interest-rate environment that is hurting its mortgage business.
WaMu has seen a reduction in its net interest margin — the difference between what it charges for loans and what it pays for deposits — as short- and long-term rates have converged in the past year.
That change was partly to blame for a decline in WaMu's home-loans business, which reported a fourth-quarter loss of $122 million.
WaMu also blamed a national slowdown in new-home sales and an increase in delinquencies on subprime loans, which are aimed at borrowers with tarnished credit.
"Our loan-loss reserves have had to increase because of the deterioration of some credit," Chairman and CEO Kerry Killinger said in an interview Wednesday, referring to the subprime market.
WaMu beat analysts' average profit estimate of 88 cents a share.
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But its revenue, at $3.6 billion, fell short of the $3.7 billion analysts had been expecting, according to TheStreet.com.
"Certainly, there were some disappointments, especially in the subprime area," said Frederick Cannon, an analyst at Keefe, Bruyette & Woods in San Francisco.
"I think they're set up to do better in 2007. How much better will be determined by factors outside their control," Cannon said.
For the year, WaMu reported a profit of $3.56 billion, or $3.64 a share, compared with $3.43 billion, or $3.73 a share, in 2005.
The company opened 144 new branches and added 1.23 million new checking accounts during the year.
It plans to open 150 new branches and add 1 million new checking accounts this year.
Killinger said he expects cost-cutting efforts from the past year, including the elimination of more than 10,000 jobs, will pay off in 2007.
"We got accomplished in 2006 what we needed to do," he said.
Amy Martinez: 206-464-2923 or amartinez@seattletimes.com
| Annual results for WaMu | |||
| Dollar figures in thousands, except per share. | |||
| Annual | Dec. 31 2006 | 2005 | Percent change |
| Profit | $3,558 | $3,432 | +3.7 |
| Per share | 3.64 | 3.73 | -2.4 |
| Assets | 346,288 | 343,573 | +0.8 |
Copyright © 2007 The Seattle Times Company
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