WaMu exits subprime business and lays off workers
SEATTLE -- The Seattle company says it's closing 190 of 336 home loan centers and sales offices. It's closing WaMu Capital, its broker dealer business.
It's cutting 2,600 home loan positions — about 22% of those workers — plus 550 corporate and other support positions.
WaMu is discontinuing all subprime mortgages.
The company says it expects to take a fourth quarter after-tax charge of $1.6 billion, resulting in a net loss for the quarter.
Washington Mutual also said Monday it would slash its dividend and announced a $2.5 billion capital infusion.
"I'm not at all surprised. It's just another casualty in the mortgage tsunami sweeping over the country," said Sean Egan, managing director of credit rating firm Egan-Jones Ratings.
Among the steps announced Monday afternoon, Wamu will sell $2.5 billion of convertible preferred stock.
The thrift said it will slash operating expenses by about $500 million next year by reducing its residential mortgage business and corporate support staff.
Wamu is also slashing its dividend payout 73% to 15 cents a share. At the old rate, Wamu's beaten down shares had offered a dividend yield of nearly 12%.
WaMu Chairman and Chief Executive Kerry Killinger said the moves will let the thrift pursue various initiatives, particularly in retail banking.
The bank expects the convertible offering and dividend cut will generate about $3.7 billion of tangible equity. This, combined with job cut savings, will help Wamu weather the downturn in credit and housing markets.
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