WaMu May Need to Hit the ATM Again

Stock quotes in this article: WM , BAC  

Nonaccrual subprime mortgage loans totaled $3 billion, or 18.68% of total subprime loans as of June 30. The net charge-off rate for the subprime portfolio was 13.44%.

Charge-offs and Capital Erosion

Loan charge-offs will continue to be the focus of attention for investors trying to determine WaMu's capital adequacy. While the second table shows considerable strengthening of reserves and capital ratios, the $2.2 billion in net charge-offs for the second quarter represents a large portion of the $7.2 billion in capital raised.

Washington Mutual's annualized return on common equity for the quarter was a negative 69%, showing that despite the capital raising and efforts to reduce its balance sheet size, several more quarters like this one will lead to another capital shortage.

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Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.




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