shares plunged 13% on Thursday after an analyst said that creditors "have been quietly pulling funds from the bank."
Gimme Credit analyst Kathleen Shanley said she was not convinced the Seattle thrift's outlook was as conservative as rivals like
. While she noted the bank boosted its loan loss provision this quarter and is "'comfortably' well-capitalized under regulatory standards," she cited potential liquidity challenges for WaMu.
"We won't use the phrase 'run' on the bank, but we would be remiss if we did not observe that many creditors have quietly been pulling funds from the bank," Shanley writes. "With unsecured creditors taking a giant step backwards, the combined percentage of the balance sheet funded by deposits and the Federal Home Loan Banks has increased to 78%, up from 75% at year-end and 71% a year ago."
WaMu emailed a statement late Thursday downplaying the report.
"As we stated publicly months ago, WaMu funds all of its business throughits banking operations and does not rely on commercial paper," the company said.
Investors have grown increasingly jittery of WaMu over the last two days after the Seattle-based company posted a
of $3.3 billion, or $6.58 a share, and took a $5.9 billion provision in the quarter to offset the rise in bad loans as home prices significantly fell as well as changes in the company's provisioning assumptions.
While WaMu assured analysts that it has sufficient capital on its conference call, some observers aren't so sure. Given that the thrift expects cumulative losses on its mortgage portfolio to be at the high end of a previous range of $12 billion to $19 billion, the company may have no choice but to
. WaMu received a $7 billion capital injection in April from TPG and other investors.
Wall Street is also becoming increasingly concerned that the nation's largest thrift won't be able to pay its debt.
Following the release of earnings late Tuesday, Standard & Poor's downgraded the Seattle company's counterparty credit rating to one spot above junk, while Moody's Investors Services said it was considering lowering WaMu's debt ratings to junk status.
"We can't fault uninsured depositors for being cautious; they aren't being paid to take on equity-like risks," Shanley later said in the note.
In a nutshell if WaMu's ratings were to fall to junk status, "the loss of investment grade ratings would likely result in further reductions in the sources of liquidity available to the company; may result in collateral or margining requirements under derivative and repurchase agreements with counterparties, which could increase the company's funding costs and further reduce its earnings and liquidity; and could affect the company's ability to do normal business operations, in ways that could be material," Gimme Credit cited WaMu's annual filing as saying.
Shares closed down 62 cents to $4.03 on Thursday.