WaMu May Need to Hit the ATM Again

Washington Mutual(WM Quote) may have no choice but to raise more capital down the line, despite its reassurances to investors that it is adequately capitalized for the foreseeable future in the wake of massive second-quarter losses.

The Seattle thrift's shares rallied almost 10% Wednesday, after it reassured investors that it would not have to raise capital after reporting a loss of $3.3 billion, or $6.58 a share, Tuesday after the bell. The loss was well in excess of analysts' expectations, as the continuing decline in housing prices surprised the company.

It's been almost a year since we asked if Washington Mutual was the next Countrywide, the huge mortgage lender that sold itself to Bank of America(BAC Quote) on July 1.

With its large mortgage portfolio, including some of the riskiest mortgage products that were so popular during the housing boom, WaMu has been another bellwether for the crisis. While its capital position is better than it was a year ago and its loan loss reserves significantly increased, the bank may need to raise money if it continues to suffer losses as steep as it reported for the first quarter.

A Big Miss

WaMu's net loss of $3.3 billion in the second quarter compares to a loss of $1.1 billion in the first quarter and net income of $830 million in June 2007. The bank's loss per diluted share was $6.58 -- $3.24 of which resulted from accounting changes related to its stock issuance in April. Excluding these one-time non-cash charges, the loss would have been $3.34 per share. The consensus estimate was a loss of $1.05 per common share.