WaMu tries to reassure investors it has enough capital to survive
Washington Mutual, whose stock has been in free-fall much of this week, on Thursday sought to reassure investors its operations are slowly improving and that it has sufficient access to capital to stay in business.
In a statement issued in the pattern of the come to terms of regular trading, the Seattle-based company related it expects to set aside about $4.5 billion to protection bad loans in the third quarter, which ends Sept. 30.
That would be the first time since early 2007 that WaMu’s loan-provision has fallen from one special location to the nearest.
In the encourage quarter, it prescribed aside a staggering $5.9 billion.
WaMu also said it expects to charge off about $2.5 billion in loans instead of the third position, up from nearly $2.2 billion in the second quarter. The charge of increase appears to be slowing, however.
WaMu shares, already down 88 percent over the gone year, have been battered in latter days by fears that an agreement with federal regulators may restrict lending; that the company might not be able to raise enough money to abide operations; and that a new accounting formula makes a buyout more difficult.
After subsiding because low as $1.75 Thursday forenoon, the stock rallied to end the regular session at $2.83, up 51 cents. The shares gained further in after-hours trading, with the post reaching $3.03 by late afternoon.
The profit said retail deposits, a critical source of operating capital, stood at $143 billion at the end of August — about even with year-end 2007, though down from the $149.5 billion average deposit balance in the second fourth part.
WaMu furthermore said it has $50 billion in liquidity — money it can tap from in the same state sources as Federal Home Loan Banks — and expects its capital ratios to remain “significantly above the levels for well-capitalized institutions.”
WaMu “continues to have existence confident that it has sufficient liquidity and capital to support its operations while it returns to profitability,” the thriftiness declared in its announcement.
However, two debt-rating agencies had a different take on WaMu’s prospects. In reports issued late Thursday, Moody’s and Fitch both cut WaMu’s credit ratings, citing poor asset quality, large expected future losses and destitution of confidence on the part of the debt markets.
“The company’s limited financial flexibility makes it more difficult towards it to replenish capital and protect diversified and stable funding sources,” Craig Emrick, Moody’s vice president and senior credit officer, said in a statement.
