High-yield/macroeconomics (fka YIELD)

[DewDiligence]

Washington Mutual Expects Continued Rise in Bad Loans

http://online.wsj.com/article/SB118943028803122516.html

>>
Sees 2007 Loss Provision of $2.2 Billion

By DAVID ENRICH
September 10, 2007 9:26 a.m.

NEW YORK -- Washington Mutual Inc. Chief Executive Kerry Killinger warned Monday that the company anticipates a continued rise in bad loans, which will take a toll on WaMu's earnings.

Mr. Killinger, speaking at a financial-services conference, said the Seattle-based thrift will set aside as much as $2.2 billion this year to cover potential loan losses. That is $500 million more than WaMu predicted as recently as July.

Mr. Killinger also cautioned that WaMu will book lower gain-on-sale income from selling mortgage loans instead of keeping them on the company's balance sheet.

Mr. Killinger offered a bleak outlook for the state of the housing industry nationwide. "Most housing markets appear to be weakening to us," he said, adding that there could be declines in housing prices around the country over the next few quarters.

Amid weakening housing prices and other factors, Mr. Killinger said, WaMu could face "a higher level of charge-offs for the foreseeable future."

Nonetheless, Mr. Killinger said the company has opportunities to profit from the mortgage-industry wreckage by, among other things, boosting its market share.
<<