Washington Mutual Inc, the biggest US savings and loan company, will write down the value of its home-lending unit by US$1.6 billion in the fourth quarter and cut about 6 percent of its workforce as mortgage-market losses increase.
Washington Mutual also cut its quarterly dividend to US$0.15 a share from US$0.56 and forecast a loss for the quarter, the Seattle-based bank said in a statement yesterday. Provisions for bad loans will be US$1.5 billion to US$1.6 billion, more than the US$1.3 billion the company previously said. It plans to shutter 190 of 336 home-loan centers.
Fitch Ratings and Moody's Investors Service Inc lowered Washington Mutual's credit rating, citing the firm's deteriorating mortgage assets. The bank has lost 56 percent of its market value this year, the worst performance in the 24-member KBW Bank index, amid declining US housing prices and record home loan delinquencies. Washington Mutual said it plans to sell US$2.5 billion of convertible stock to shore up capital.
"They're clearly concerned the industry will stay in a negative mode for an extended period," said Richard Bove, an analyst at Punk Ziegel & Co in Lutz, Florida. "The fact they're laying off so many people indicates they're concerned this is not just a one-time event."
He rated the stock "market perform."
Fitch downgraded the firm's rating to A- from A, because of "worsening asset quality" and "extremely challenging conditions in the US residential mortgage market."
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