High-yield/macroeconomics (fka YIELD)

[DewDiligence]

WaMu to Cut Dividend, Jobs

[A dividend cut was widely expected inasmuch as the yield was about 12%, which is higher than sovereign paper from most banana republics.]

http://online.wsj.com/article/SB119732179759119886.html

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By BENJAMIN SIEGEL
December 10, 2007 4:30 p.m.

Washington Mutual Inc. plans to raise $2.5 billion through a preferred stock offering and will cut its dividend to 15 cents from 56 cents in moves designed to generate $3.7 billion in additional capital.

In addition, the Seattle bank will cut $500 million in noninterest expense by reducing its Home Loans business and other expenses. It will discontinue all remaining lending through its subprime mortgage channel; close 190 of 336 home loan centers and sales offices; and eliminate 2,600 Home Loans positions, or about 22% percent of its Home Loans staff.

The company noted the moves at its Home Loans business and the related non-cash charge will result in a net loss for the fourth quarter.

The company will also close WaMu Capital Corp., its institutional broker-dealer business, as well as its mortgage banker finance warehouse lending operation.

Meanwhile, the company now expects its fourth-quarter provision for loan losses to be between $1.5 billion and $1.6 billion, approximately twice the level of expected fourth quarter net charge-offs.

Washington Mutual shares fell nearly 4% in after-hours trading. They rose about 4.5% in regular trading on Monday.
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