Subprime Meltdown Kicks WaMu's @#$, Profits Down 75%

It must not be fun around WaMu headquarters today. Profits are down a whopping 75%.

From the AP, emphasis ours:

Washington Mutual said its loan loss provision for the quarter will total $975 million. The provision exceeds net charge-offs — loans written off as having no chance of being recovered — by $550 million. Loss provisions, on top of paying current charge-offs, are used to cover future losses.

The company will also write down the value of various loans and portfolios by about $410 million.

Rising delinquencies and defaults among mortgages, especially subprime loans given to customers with poor credit history, have led to the near disappearance of investors willing to buy the loans in the secondary markets and forced lenders to reserve more cash for losses.

Um… damn. We hate it when we estimate incorrectly to the tune of $550 million dollars.


Washington Mutual 3Q Earnings to Tumble
[AP]
(Photo:cmorran123)

Comments

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  1. HeyThereKiller says:

    Get in the pen Bill… it’s time for a change

  2. ColoradoShark says:

    My mortgage is with Wamu. It’s a normal fixed 15 year. Wamu is going to need to raise some money.
    My paranoid self sees many late fees from them and them forgetting to pay the taxes and insurances they collect for the escrow account.

  3. legotech says:

    I’m moving to my company’s credit union next week. We get paid on Thursday morning, last week I was travelling, Thursday night (9pm pacific) I make a purchase. Monday I get home and look at my statement online. They REVERSED the times that my pay and purchase went in, causing me to overdraw, making it look as if my pay didn’t hit my bank account until after the purchase at 9pm.

    They got the $30 this time, but thats it, I’m done with WaMu

  4. Ben Popken says:

    This is called “flushing the debt.” All the major financial institutions are doing it, declaring big losses on their books and coming clean about all the bad debt on the books. That’s why the stock markets are up, because investors are betting that the worst has now been seen.

  5. gorckat says:

    That’s how all banks, and credit unions, do it, isn’t it? Debits before credits?

  6. zolielo says:

    @HeyThereKiller: Awesome comment. And also likely what is to happen.

  7. Sidecutter says:

    @gorckat: No, it has traditionally been practice to list credits before debits, in fact.

  8. SadSam says:

    @ColoradoShark:

    Do your own escrow, why give the back an interest free loan and then fret about whether they are going to pay your taxes and insurance.

  9. CumaeanSibyl says:

    @Ben Popken: That just makes no sense to me. “Oh, the numbers aren’t as disastrous as they could be! Let’s buy some stock.”

    I think it’s awfully naive of the investors to assume that the worst is now past. Why not buy stock in companies that don’t handle mortgages? Seems like a safer bet to me.

  10. emona says:

    They’d better stay in business. WaMu is the best (bank) thing that’s ever happened to me.

  11. calacak says:

    Just wait until us taxpayers will have to bail out WaMu or some other bank because of their foolish business practices.

    Good thing Bush vetoed the bill that will help poor children with no healthcare. We can use that money to save the banks!

  12. synergy says:

    Oh well. That’s ok. I’m sure the bigwhigs will be saved by their friends and relatives in Congress.

  13. synergy says:

    @SadSam: I agree. It’s what my mother started doing once she really realized she could do it her own self at a lot less.

  14. mac-phisto says:

    *scratches head* & how exactly are they getting away with overfunding a reserve account by 1/2 billion dollars again? this is just a diversion of income, it’s not any indication of future losses.

    i’m not too impressed by this article – it’s a little misleading. “net charge-offs” are not “loans written off as having no chance of being recovered”. net charge-offs = charge-offs – recoveries. recoveries are any monies paid on the balance of a charge-off (proceeds of a property sold at auction, money received from a lawsuit or payments, etc.).

    it seems like the money is there, so they’re reserving it, but the auditors don’t usually like that. ALL has been abused in the past as a way to hide profits from investors & it seems like that is what’s happening here. provisioning twice as much as your writing off is a great way to grab the attention of your regulator. enjoy the audit, wamu!

  15. Bay State Darren says:

    WARNING: Bad financial logic below

    OK, now that I warned you, [climbs up on soapbox, slips and on residual soap and nearly splatters brain] You know profits that are down are still profits.* When companies whine about less profits or slow profit growth, I listen for the world’s tiniest violin. I like to break down all financial outcomes into a simple formula:
    $ in>$ out= :-)
    So by my calculations, they’re still doing fine. This is where I consider myself smarter than the entire business world. If I pay for all essentials and still have extra beer money, I’m a happy dude. Sorry Wam-U, I just can’t feel sympathy, you’re still taking in more dough than you had to spend to make it, that’s a good thing. BTW Wammy, keep doing the ads with the stodgy, uptight, “Old Money” traditional bankers. That shit is funny!

    *Yes, yes, I understand the desire for growth. But can’t corporate dudes be kind of glass-half-full about this? [God, this optimism thingy feels wierd. I definitely don’t get to use it about my finances.]

  16. XTC46 says:

    @BAY STATE DARREN

    Yes more money in than out is usually good. However, you also have to realize that in many business they have to make large profits in some areas to cover the loses in others. Many businesses take loses in some products or services just to provide for the customer and to make their bigger services look even better. They depend on their big “cash cow” services to subsidies the losses of their “dogs”

  17. @CumaeanSibyl: Buying stock in companies that don’t handle mortgages is a great idea. Even better, buy stock in companies that are assured to do well in the near future. Good example: companies who sell military related equipment. I don’t like that George W Bush character much, but I’ll be damned if his phony made up war hasn’t brought me nearly 800% earnings for the last couple of years.

  18. IRSistherootofallevil says:

    You should have bought companies that handled mortgages two months ago during the subprime crisis when all the banks got their asses kicked. They’re bouncing back. Regardless or whether or not the worst is over, they bounced back, and you can just sell. There’s no problem with capitalizing on cattle mentality.