Washington Mutual Inc. tumbled as much as 13 percent in New York trading after UBS AG analyst Eric Wasserstrom said mortgage-related losses will exceed the lender's forecast.
Washington Mutual will lose about $21.7 billion from mortgages through 2011, compared with $12 billion to $19 billion the company forecasts, Wasserstrom wrote in a report today. He cut his 12-month share price target to $8.50 from $11.
The company, the biggest U.S. savings and loan by assets, had ranked among the major mortgage sellers for buyers with the weakest credit. Seattle-based Washington Mutual had to write down the value of its home-loan unit by $1.6 billion in the fourth quarter, slashed its dividend twice this year and forecast losses through 2012 on home loans.
Washington Mutual ``will not demonstrate meaningful profitability until late 2010 or later,'' Wasserstrom wrote, and said the lender's total losses may be about $27 billion.
Company spokesman Derek Aney said Washington Mutual doesn't comment on analyst reports.
The lender fell 94 cents to $6.59 at 2:28 p.m. on the New York Stock Exchange after earlier falling as low as $6.56.
Billions in losses from the collapse of subprime mortgages helped to displace Washington Mutual as the largest U.S. savings and loan by stock market value. Paramus, New Jersey-based Hudson City Bancorp took over the top spot this month. Washington Mutual removed Chief Executive Officer Kerry Killinger as chairman June 2, replacing him with an independent director.
Hudson City
Hudson City, which has never made a subprime loan, refused to lower its credit standards during the housing boom this decade, contributing to a rise in profit during the worst real estate crisis since the Great Depression.
Killinger in April raised $7 billion from a group led by David Bonderman's TPG Inc. after a first-quarter loss of $1.14 billion. The world's largest financial institutions reported more than $392 billion in asset writedowns and credit losses tied to the U.S. housing slump, according to Bloomberg data.
National City Corp., Ohio's largest bank and subprime lender, fell 12 percent to $4.35 at 2:28 p.m. in New York trading. The bank has been the worst-performing company tracked by the KBW Banking Index this year to date. PMI Group Inc. and Radian Group Inc., the second- and third-largest U.S. mortgage insurers, fell as much as 14 percent and 18 percent
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