Originally published July 19, 2007 at 12:00 AM | Page modified July 19, 2007 at 2:02 AM
WaMu gets boost from retail banking
Washington Mutual said Wednesday that second-quarter profit rose 8. 2 percent as record growth in its retail banking, credit-card and commercial...
The Associated Press
Washington Mutual said Wednesday that second-quarter profit rose 8.2 percent as record growth in its retail banking, credit-card and commercial businesses offset a loss in its home-lending unit.
The better-than-expected results gave the Seattle company's stock a boost in after-hours trading.
Chairman and Chief Executive Kerry Killinger said the company's home-loans group, which has struggled amid the downturn in the national housing market, is showing signs of improvement and is expected to return to profitability by the end of the year. Washington Mutual also said it would stop making some of the riskiest home loans.
For the three months ended June 30, the thrift said net income was $830 million, or 92 cents a share, up from $767 million, or 79 cents per share, a year earlier.
Revenue for the latest quarter, including net interest income and noninterest income, was $3.79 billion, up 4 percent from $3.64 billion last year.
The results, released after the markets closed for regular trading, beat the consensus estimate of analysts polled by Thomson Financial, who forecast earnings of 89 cents a share on $3.69 billion in revenue.
Shares of Washington Mutual closed the regular trading session down 75 cents, or 1.8 percent, to $41.61 Wednesday, but then rose $1.39, or 3.3 percent, to $43 in after-hours trading. The company's stock, which is down 8.5 percent so far this year, has traded between $38.73 and $46.79 over the past 52 weeks.
Home-loans unit
Washington Mutual's home-loans unit swung to a $37 million loss in the second quarter, compared with a $50 million profit in the same period a year ago and a $113 million loss in the first quarter of this year.
Executives said the company expects the languishing mortgage market to continue pressuring results in its home-loans group, which has been hurt most by troubles in subprime lending to borrowers with shaky credit.
Washington Mutual has tightened lending standards in its subprime market and scaled back its subprime portfolio, originating 70 percent fewer loans in that category in the latest quarter than in the same period last year.
Earlier this year, the company launched a $2 billion assistance program aimed at helping subprime borrowers avoid foreclosure.
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In new moves announced Wednesday, Killinger said Washington Mutual would no longer offer subprime loans that let borrowers provide only partial statements of their income. And the company will quit offering subprime loans with adjustable interest rates that last less than five years.
Many subprime borrowers who have wound up in foreclosure have run into trouble with loans that lock in low interest rates for the first two or three years, then get adjusted to much higher rates.
Killinger noted it's been two years since Washington Mutual started anticipating a cooling in the housing market and said steps the company has taken to protect itself and strengthen other businesses are paying off.
Accounts added
Its retail-banking division added 406,000 new checking accounts during the quarter, and its credit-card unit, formed after the company's acquisition of Providian Financial two years ago, opened 928,000 new accounts.
The commercial group originated $4.3 billion in loans, primarily to multifamily and commercial real-estate borrowers.
Overall, Killinger said he's pleased with "very solid results and strong growth in our primary retail distribution network."
"The company's managing through a challenging environment very well," Killinger told The Associated Press, citing the housing slump that's expected to continue. "But I think we're well-positioned and well-diversified to handle this period."
Information from Bloomberg News is included in this report.
Copyright © 2007 The Seattle Times Company
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