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Washington Mutual Misses Estimate

The company sees its provision for loan losses swell.
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Fourth-quarter earnings rose 29% at

Washington Mutual

(WM) - Get Waste Management, Inc. Report

but missed Wall Street estimates by a fairly wide margin as the West Coast mortgage lender struggled with a swerving yield curve and saw higher credit-card losses.

WaMu earned $865 million, or 85 cents a share, in the quarter, compared with earnings of $668 million, or 76 cents a share, a year ago. Analysts were forecasting earnings of 90 cents a share in the most recent period.

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Net interest income rose 16% from a year ago, as WaMu's asset volume rose even as the profitability of loans was crimped by a 2-basis-point narrowing of the net interest margin to 2.77%. Most banks felt pressure on their lending margin last quarter as the difference between rates on short- and long-term loans came in significantly.

Total home loan volume was $50.43 billion in the latest quarter compared with $50.95 billion a year ago, "reflecting a slowing housing market." Average retail deposits totaled $140.21 billion, up 6% from the year-ago quarter.

WaMu had noninterest income of $818 million in the latest quarter compared with $717 million a year ago, helped by a 14% rise in depositor and other retail banking fees.

The company recorded a provision for loan losses of $121 million, including $99 million for credit card loans, in the latest quarter compared with $37 million last year. The company added $13.4 billion of new assets through the acquisition of Providian in the quarter.

Revenue from sales and servicing of home mortgage loans were $264 million in the latest quarter, compared with $384 million a year ago. WaMu said the cost of hedging its portfolio in a rising interest rate environment was the main culprit, while competitive pressure from other lenders also crimped the profitability of loans it sold.