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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