The nation’s largest savings and loan, Washington Mutual, said Tuesday morning that it had raised $7 billion in capital through an investment group led by private equity firm TPG. It also said that it would slash its quarterly dividend.
Washington Mutual also said that it would reduce its quarterly dividend to a penny from 15 cents and that it would stop buying mortgages from brokers. In addition, it plans to close all of its freestanding loan offices.
Shares of the bank fell $1.42 cents, to $11.73 in afternoon trading on Tuesday.
“We’re very pleased that TPG and these major investors have expressed their confidence in WaMu’s underlying value and its growth potential,” the chief executive, Kerry Killinger, said.
The need to raise capital represented a remarkable turnabout for Washington Mutual, whose once-highflying stock has swooned along with home prices. Under Mr. Killinger, Washington Mutual grew rapidly in recent years by lending aggressively, particularly to low- and middle-income borrowers, and by buying smaller competitors. But it has been struggling with higher mortgage delinquencies and defaults among homeowners.
But during the last year, Washington Mutual’s stock price has plunged more than 67 percent as the mortgage crisis has spread through the financial markets. The stock closed up $2.98 at $13.15 on Monday.
The new funds are expected to help offset losses on par with levels last seen during the savings-and-loan crisis of the early 1990s.
Washington Mutual is the latest financial institution to go hat-in-hand to outside investors. Since the sharp downturn in the credit and housing markets last summer, Wall Street giants like Citigroup, Merrill Lynch and UBS have raised tens of billions of dollars. But Main Street lenders have been hit hard, too. Many have slashed their dividends, and investment bankers say several are looking to raise money or are seeking out acquisitions.
Washington Mutual has been hit hard by losses stemming from mortgages made to borrowers with risky, or subprime, credit. The thrift pushed hard into products like interest-only and so-called negative amortization loans, which are now among the most toxic.
The lender also has significant exposure to California and Florida, where property values have declined the most.
And after acquiring Providian Financial’s subprime credit card business in 2005, Washington Mutual now expects a sharp increase in loan charge-offs. In response, Washington Mutual has cut its dividend, eliminated several thousand jobs and raised $3.7 billion in a separate preferred stock offering. Still, its stock price has continued to plummet.
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Washington Mutual also said that it would reduce its quarterly dividend to a penny from 15 cents and that it would stop buying mortgages from brokers. In addition, it plans to close all of its freestanding loan offices.
Shares of the bank fell $1.42 cents, to $11.73 in afternoon trading on Tuesday.
“We’re very pleased that TPG and these major investors have expressed their confidence in WaMu’s underlying value and its growth potential,” the chief executive, Kerry Killinger, said.
The need to raise capital represented a remarkable turnabout for Washington Mutual, whose once-highflying stock has swooned along with home prices. Under Mr. Killinger, Washington Mutual grew rapidly in recent years by lending aggressively, particularly to low- and middle-income borrowers, and by buying smaller competitors. But it has been struggling with higher mortgage delinquencies and defaults among homeowners.
But during the last year, Washington Mutual’s stock price has plunged more than 67 percent as the mortgage crisis has spread through the financial markets. The stock closed up $2.98 at $13.15 on Monday.
The new funds are expected to help offset losses on par with levels last seen during the savings-and-loan crisis of the early 1990s.
Washington Mutual is the latest financial institution to go hat-in-hand to outside investors. Since the sharp downturn in the credit and housing markets last summer, Wall Street giants like Citigroup, Merrill Lynch and UBS have raised tens of billions of dollars. But Main Street lenders have been hit hard, too. Many have slashed their dividends, and investment bankers say several are looking to raise money or are seeking out acquisitions.
Washington Mutual has been hit hard by losses stemming from mortgages made to borrowers with risky, or subprime, credit. The thrift pushed hard into products like interest-only and so-called negative amortization loans, which are now among the most toxic.
The lender also has significant exposure to California and Florida, where property values have declined the most.
And after acquiring Providian Financial’s subprime credit card business in 2005, Washington Mutual now expects a sharp increase in loan charge-offs. In response, Washington Mutual has cut its dividend, eliminated several thousand jobs and raised $3.7 billion in a separate preferred stock offering. Still, its stock price has continued to plummet.
Story contributed by New York Times: Read More
