Washington Mutual Cutting Jobs

One day after reporting a 52% decline in earnings, Washington Mutual ( WM) announced it is cutting 2,500 jobs in order to "enhance the growth and profitability" of its ailing mortgage operation.

The Seattle-based thrift said it intends to eliminate the jobs by year's end. As part of its cost-cutting plan, WaMu will close 100 loan offices in 17 "non-signature" markets, including Delaware, Hawaii, Indiana and Michigan.

"We plan to fuel significant new growth in our retail mortgage operations by redirecting resources to our most productive and profitable activities," said Tony Meola, executive vice president of WaMu's Home Loans division.

Late Wednesday the savings and loan company reported net income of $489 million, or 55 cents a share, compared to $1 billion, or $1.09 a share, a year earlier.

Washington Mutual said net home loan mortgage banking income fell to zero from $611 million a year ago, due to the large change in the hedging performance of the company's mortgage servicing rights since the end of the first quarter.

On June 28, the company slashed 2004 earnings guidance to $3 to $3.60 a share, as it expected the increase in long-term interest rates would be sustained. WaMu said the impact of rising rates on its mortgage banking unit, which is compounded by the unit's high cost structure, would result in a lower-than-expected gain on sales and increased overall hedging costs, especially in the second half of this year.

In Thursday trading, WaMu shares closed down 40 cents, or 1%, to $39.10.

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