WaMu has $3.33 bln loss, may be cut to “junk”

Washington Mutual Inc, the largest U.S. savings and loan, posted a $3.33 bln second-quarter loss on Wednesday as souring mortgages forced it to set aside more money for loan losses.

The thrift's deteriorating health prompted Moody's Investors Service to say it may downgrade Washington Mutual to "junk" status, and shares of WaMu fell more than 2%.

Excluding a one-time adjustment, Washington Mutual said it lost $3.34 per share — triple the $1.09 per share loss analysts on average expected, according to Reuters Estimates. Retail banking, mortgage and credit card units all posted losses.

Washington Mutual had posted a profit of $830 mln, or 92 cents per share, a year earlier.

The net loss equaled $6.58 per share including a one-time adjustment related to the Seattle-based thrift's $7.2 bln capital raising in April from private equity firm TPG Inc and other investors.

Washington Mutual set aside $5.91 bln for loan losses, and said net charge-offs totaled $2.17 bln.

It also said it expects cumulative residential mortgage loan losses to be "toward the upper end" of the $12 bln to $19 bln range it had forecast in April. Some analysts had predicted the losses might end up higher.

"We are planning for continued softness in housing for the next several quarters," Chief Executive Kerry Killinger said in an interview. "The capital that we have in place is sufficient to manage through this period. We have no plans at this point to raise additional capital."

Washington Mutual also said Killinger, Chief Operating Officer Steve Rotella and Chief Financial Officer Tom Casey will not receive annual incentive payments under a company bonus plan, in light of the thrift's performance in 2008.

WaMu has cut 6,205 jobs this year, leaving it with 43,198 employees, and analysts widely expect further cuts as Killinger tries to reduce expenses by $1 bln.