WaMu warns of loss, slashes jobs
Nation's largest thrift also cuts dividend in response to credit and housing market woes. Analyst says CEO is safe.
NEW YORK (CNNMoney.com) -- More fallout from the nation's housing crisis emerged late Monday as Washington Mutual said it would take a loss in the current quarter, slash its dividend and lay off more than 3,000 workers.
Making the announcement just after Monday's closing bell, the nation's largest thrift said its board of directors would cut its quarterly dividend, a move that have long been speculated by analysts, to 15 cents a shares from 56 cents a share.
"It's not a cure all, but certainly not a surprise," said Punk, Ziegel & Co.'s Richard Bove. "They were much more aggressive than I thought."
In addition, WaMu said it would raise approximately $2.5 billion through a convertible stock offering.
The company said the moves should provide the company with a combined $3.7 billion cash infusion.
With the housing market showing little sign of improvement, the company also announced a number of changes in its mortgage business, including the elimination of 2,600 mortgage-related jobs and more than 500 corporate and support jobs.
WaMu, which has been among the hardest hit by the housing meltdown, also said it would shutter more than half of its home loan centers and mortgage sales offices and that it was discontinue all subprime mortgage lending.
Besides warning of a loss in the current quarter, WaMu said that it expected its loan loss provisions to be between $1.5 and 1.6 billion during the period, about twice the level originally expected.
WaMu Chairman and CEO Kerry Killinger, who has faced plenty of criticism over the company's recent woes and its lagging stock performance said the announcement would "fortify WaMu's capital and liquidity position" and allow the company to focus on other areas, including its robust retail banking business.
Bove said Monday's announcement could renew takeover speculation of WaMu, but he stressed that Killinger will mostly likely remain at the helm of the bank despite Monday's news.
"This is the way this business functions," said Bove, stressing the cyclical nature of the savings and loan industry. "To say that Kerry Killinger did something terribly negative to make his company stand out from the rest of the pack that is inappropriate."