WaMu Profit Tumbles 9%

The thrift's quarter includes several charges, but revenue disappoints.
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Washington Mutual's (WM) - Get Report profit fell almost 9% in a charge-filled third-quarter that did not live up to Wall Street expectations.

Profit fell 8.9%, to $748 million, or 77 cents a share compared with $821 million, or 92 cents a share in the third quarter of last year. Revenue of $3.68 billion, including a $166 million provision for loan losses, fell just shy of the $3.71 billion that analysts had expected.

Analysts were pegging the Seattle bank to earn 93 cents in the quarter, according to Thomson Financial.

During the quarter, WaMu took an after-tax charge of $31 million, or 3 cents a share, related to the sale of $2.53 billion of mortgage servicing rights, which is included in its earnings. It also took a $33 million charge after taxes, or 4 cents a share related to the company's ongoing efficiency initiatives.

Even with the 7 cents in charges, WaMu fell short of analyst expectations.

WaMu, which is one of the nation's biggest home lenders, has been hit hard by the slowdown in the mortgage market. Over the past year, the thrift has been laying off people and scaling back operations to save costs.

"We fully anticipated that the MSR sale, the sale of our retail mutual fund management company and our productivity and efficiency initiatives would produce unevenness in our quarterly earnings during the remainder of 2006, and we've seen that impact in the earnings we announced today," says Kerry Killinger, WaMu's chairman and chief executive, in a regulatory filing. "Nevertheless, when taken together, we continue to expect that these actions will be accretive to earnings in 2007."

Net interest income fell 2.9%, to $1.94 billion.

WaMu's loan held for investment rose 10.7%, to $240 billion. Deposits also rose 10.7%, to $211 billion.

Shares of WaMu, which closed at $43.71, down 6 cents, were falling in after the bell. The stock, in after-hours trading was down, $1.29, to $42.42.