Washington Mutual Inc. reported its third-straight quarterly loss, and its worst of the downturn, on lofty credit provisions.
The results fell far short of analysts' already diminished expectations.
After the markets closed Tuesday, the Seattle thrift company said it lost $3.33 billion in the second quarter, or $6.58 a share, after earning $830 million a year earlier.
The loss included an adjustment from a capital issuance in April. Excluding the one-time change, Wamu lost $3.34 a share. Analysts polled by Thomson Reuters, on average, had predicted a loss of $1.05 a share.
Wamu lost $1.1 billion in the first quarter and $1.87 billion in the fourth.
The $310 billion-asset company, battered by mortgage losses in Florida and California, built up its reserve for credit losses by nearly 80% during the quarter, to $8.46 billion. It cited a need to ramp up provisions "in response to continued declines in housing prices nationwide."
Wamu raised $7.2 billion of capital in April, cut its dividend to a penny a share, closed its stand-alone home loan centers, and shed about 3,000 jobs as part of a plan to downsize its mortgage business and shift its focus to retail banking. Last month it announced plans to lay off another 1,200 workers, or 2.6% of its work force, across various departments.
Kerry K. Killinger, Wamu's chief executive officer, said during a conference call Tuesday that the cost-cutting steps will help it save about $1 billion annually. He also said Wamu's capital levels are sound. Its Tier 1 ratio is 7.8%, above the 6% minimum preferred by regulators.
"We remain confident that we have sufficient capital to successfully manage our way through this challenging period," Mr. Killinger said.
The recovery remains a work in progress, and the time line for bottom-line improvement remains unknown.
Mr. Killinger cautioned in April that Wamu's mortgage-related losses could total $12 billion to $19 billion over the next three years, but he said at a conference in May that he did not expect to hit the high end of the range. Several analysts later said the total could be even higher. Eric E. Wasserstrom of UBS AG predicted last month in a research note that it could reach $21.7 billion by the end of 2011.
In its earnings release Tuesday, Wamu said it "now expects the remaining cumulative losses in its residential mortgage portfolios to be toward the upper end of the range it disclosed in April."
