Tags: washington | mutual

Bove: WaMu Losses Will Be Huge

Tuesday, 09 Sep 2008 03:08 PM

Ladenburg Thalmann banking analyst Richard Bove expects Washington Mutual will lose $40 billion on its loan portfolio over the next three years and continues to include WaMu on his list of top 12 banks and thrifts at greatest risk of failing.

"The future of the company is questionable" if the economy continues to weaken, Bove told The Wall Street Journal.

"The problem is very simple," Bove says.

"They made a lot of bad loans, and they are absorbing high levels of loan losses. The solution for their problem is to find some mechanism for reducing the bad loans. That can't be done by a new CEO."

In July, WaMu posted a quarterly loss of $3.33 billion and said losses through 2011 in its single-family residential portfolio would probably be toward the high end of its prior forecast of $12 billion to $19 billion.

WaMu's troubled portfolio of home loans included nearly $52 billion in Option ARM mortgages as of mid-July. The firm has reduced its Option ARM portfolio by about 10 percent since the end of last year, but more than 6 percent of these loans are in various stages of default, CNN Money reports.

Of the $52 billion, $33 billion are for properties in Florida and California. The company also holds $16 billion in subprime loans and another $60 billion in home equity loans.

The number of WaMu's non-performing loans rose swiftly during the first and second quarters.

The bank's shares have already fallen nearly 70 percent this year, and investors have speculated that WaMu would seek a buyer.

On Sept. 8, WaMu ousted its CEO Kerry Killinger and named veteran banker Alan Fishman as its new chief.

Last month, Bove included WaMu on his list of top 12 banks and thrifts at greatest risk.

Bove acknowledges Fishman's accomplishments, but he warns that "the economy may determine the company's fate well before Mr. Fishman has an opportunity to make his presence felt positively or negatively."

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Ladenburg Thalmann banking analyst Richard Bove expects Washington Mutual will lose $40 billion on its loan portfolio over the next three years and continues to include WaMu on his list of top 12 banks and thrifts at greatest risk of failing. "The future of the company is...
washington,mutual
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2008-08-09
Tuesday, 09 Sep 2008 03:08 PM
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