| NEW YORK
NEW YORK Washington Mutual Inc (WM.N) shares
fell on Friday after the largest U.S. savings and loan
projected another big write-down for soured loans and was
downgraded to "junk" status by a leading credit rating agency.
At least four analysts cut their price targets for the
thrift, though Goldman Sachs & Co raised its rating to
"neutral" from "sell."
Washington Mutual shares were down 16 cents, or 5.7
percent, to $2.67 in pre-market trading. Through Thursday, the
shares had fallen 34 percent this week and 92 percent in the
In an unusual move to quell investor anxiety about its
survival prospects, Seattle-based Washington Mutual late
Thursday released third-quarter projections six weeks early and
said it had ample liquidity. The thrift has said losses from
home loans could reach $19 billion through 2011.
But Moody's Investors Service lowered Washington Mutual to
below investment-grade status, citing "reduced financial
flexibility, deteriorating asset quality, and expected
franchise erosion." Fitch Ratings also downgraded the thrift.
Washington Mutual said it expects to set aside $4.5 billion
for loan losses in the third quarter, down from the second
quarter's $5.9 billion. It also said it expects about $2.7
billion of loan write-offs.
The outlook suggests that Alan Fishman, Washington Mutual's
new chief executive, will next month report the thrift's fourth
straight quarterly loss.
In its outlook, Washington Mutual also said retail deposits
as of Aug. 31 were "essentially unchanged" from $143.6 billion
at the start of the year. This, however, suggests a decline
from $148.3 billion as of June 30, though the thrift is
offering yields as high as 5 percent on one-year certificates
Washington Mutual also said it had $50 billion of liquidity
from "reliable funding sources."
This language was reminiscent of language that Countrywide
Financial Corp, then the largest U.S. mortgage lender, used in
August 2007 when it said it could access $46.2 billion of
"highly reliable" short-term financing. Less than two weeks
later, it drew down an $11.5 billion credit line. Countrywide
was bought in July by Bank of America Corp (BAC.N).
Analysts at Goldman, Citigroup Global Markets, Credit
Suisse and Friedman, Billings, Ramsey & Co cut their price
targets for Washington Mutual, despite the quarter-over-quarter
decline in projected loan losses.
FBR's Paul Miller said the outlook suggests a third-quarter
loss of $1.20 to $1.30 per share, but he kept his forecast for
$1.40. Miller lowered his price target to $2.50 from $4.
"Washington Mutual is quickly realizing expected losses,"
he wrote. "If losses exceed guidance, Washington Mutual could
find itself in need of additional capital, which we believe
could be extremely dilutive to current shareholders."
Washington Mutual raised $7 billion of capital this year
from investors led by private equity firm TPG Inc [TPG.UL].
Credit Suisse's Moshe Orenbuch, meanwhile, wrote that
reported deposit levels "should give investors some comfort,"
but noted that Washington Mutual did not discuss wholesale
deposits, which totaled $33.7 billion on June 30.
Fishman succeeded Kerry Killinger, who was ousted last
weekend after 18 years at the bank's helm.
(Additional reporting by Al Yoon; editing by John Wallace)