Big Beat at Washington Mutual

The big mortgage lender earns $1.01 a share in the quarter.
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Washington Mutual's

(WM) - Get Report

first-quarter profits declined by 14% from a year ago but were still way above Wall Street estimates.

The Seattle-based savings and loan earned $902 million, or $1.01 a share, in the quarter, compared with $1.05 billion, or $1.18 a share, a year ago. Analysts were expecting earnings of 82 cents a share.

Excluding income from a recently discontinued finance division, WaMu's earnings rose 38% from a year ago.

The better-than-expected report stands in contrast to a string of earnings disappointments from WaMu the past several quarters.

"Our first-quarter results validate that our business model is working," says WaMu Chairman and CEO Kerry Killinger.

For nearly a year, WaMu has been moving aggressively to cut costs by eliminating thousands of jobs and closing call centers. The nationwide thrift has been hurt by the slowdown in the mortgage market and problems with the hedging strategy it employs to protect itself from interest rate fluctuations.

In after-hours trading, investors took the earnings as an indication that WaMu's restructuring effort is starting to pay dividends. The shares rose 16 cents to $39.02.

In the quarter, net interest income, the earnings WaMu generates from its lending and deposit operation was largely unchanged at $1.89 billion.

Noninterest income rose to $1.41 billion from $1.22 billion. Noninterest expenses fell to $1.84 billion from $1.94 billion.

Rising interest rates, however, are depressing the consumer's appetite for new loans. In the quarter, total loan volume was $59.92 billion, down from $63.22 billion in the fourth quarter of 2004.