Analysts widen '08 loss estimates on WaMu
(Reuters) - At least seven brokerages, including Punk Ziegel and Friedman Billings Ramsey, widened their 2008 loss-per-share view on Washington Mutual Inc (WM.N) on Wednesday, a day after the firm posted a first-quarter loss of $1.14 billion, hurt by mounting credit losses as more mortgage borrowers fall behind on payments.
Friedman Billings Ramsey analyst Paul Miller said the estimates reflected greater provision expense, slower asset growth and higher expenses.
"We estimate cumulative losses over 2008 and 2009 of $17 billion, but the timing of losses will be key to determining if WM has sufficient capital," Miller said. He does not expect WaMu to return to profitability until late 2009.
Miller said the $7 billion capital raise by WaMu should be sufficient, as long as quarterly net charge-offs remained below $3.5 billion through the third or the fourth quarter.
Punk Ziegel's Richard Bove said with the company now expecting to lose $12 billion to $19 billion more on its loan portfolio, it may have to raise more capital. "These losses will cause the company to constantly seek new capital injections."
He said investors might have to wait until early 2010 before the company begins to show significant profits, while UBS analyst Eric Wasserstrom said he did not expect the firm to return to profitability until late 2010.
"It is clear that delinquencies in WaMu's prime first mortgage portfolio are rising sharply as home prices in some of the bank's major markets continue to decline sharply and the economy slows," Bear Stearns analyst David Hilder said in a research note to clients.
Washington Mutual's mortgage unit suffered a $572 million loss in the first quarter, while retail banking lost $1.04 billion. Profit fell 20 percent to $199 million in credit cards, and 39 percent to $62 million in commercial banking.
Hilder said he expects a loan loss provision of about $3 billion a quarter would be required for the remaining quarters of 2008.
"With the turmoil in the housing and credit markets persisting, as well as rising unemployment we expect a significant increase in credit costs at WaMu in 2008," analyst Moshe Orenbuch with Credit Suisse said.
UBS' Eric Wasserstrom said loss forecasts for WaMu now assumes cumulative losses of $15 billion on mortgage assets, $4 billion to $5 billion on currently undrawn home-equity loans, and $3 billion to $4 billion in total card losses through 2010.
Shares of Washington Mutual rose 5 cents to $10.71 in morning trade on the New York Stock Exchange.
(Reporting by Ramya Dilip in Bangalore; Editing by Jarshad Kakkrakandy)
