Capital Crunch Whacks WaMu
Updated from 4:47 p.m. EST
Washington Mutual (WM) is slashing its dividend and looking to raise $2.5 billion through a preferred stock sale as part of a plan to shore up its balance sheet amid the slumping housing and credit markets.
The Seattle lender plans to cut its quarterly dividend by 41 cents a share to 15 cents. It will also offer $2.5 billion worth of convertible preferred stock to bolster its capital positioning and significantly shrink its home lending business.
WaMu expects to generate about $3.7 billion in tangible equity through the offering and dividend cut, it says.The company also plans to "resize" and make a "significant change in the strategic focus" to its home lending business. The plan includes cutting 22% of its 2,600-employee home lending unit and shuttering more than half of its 336 home loan centers. The bank also will no longer make home loans to subprime borrowers. "A substantial infusion of new capital, significant expense reductions, the major change in our home loans business and our planned dividend reduction all combine to further fortify WaMu's strong capital and liquidity position," Chairman and CEO Kerry Killinger said in a statement. "These actions will also better position us to pursue various initiatives, particularly in our leading retail banking business -- which is at the core of our business strategy."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV