Washington Mutual posts $1.87 bln Q4 loss

Kerry Killinger, chairman and chief executive of Washington Mutual, departs after speaking on a panel of experts at a national housing summit held by the Office of Thrift Supervision in Washington December 3, 2007. (REUTERS/Jonathan Ernst)

NEW YORK (Reuters) - Washington Mutual Inc <WM.N>, the largest U.S. savings and loan, suffered a larger-than-expected $1.87 billion fourth-quarter loss on Thursday, battered by mortgage defaults and write-downs.

The net loss equaled $2.19 per share, the thrift's first quarterly loss since 1997, in what Chief Executive Kerry Killinger called a period of "extreme stress."

A year earlier, it posted a profit of $1.06 billion, or $1.10 per share.

Revenue fell 5 percent to $3.41 billion.

Analysts, on average, expected a loss of $2.04 per share on revenue of $3.67 billion, according to Reuters Estimates. Washington Mutual quadrupled the amount it set aside for loan losses to $1.53 billion.

"It was not an easy quarter. I'm certainly disappointed in the overall level of performance," Killinger said in an interview. "Credit costs are elevated, and are likely to remain elevated for some time."

The Seattle-based thrift recorded a $1.96 billion loss in its mortgage unit, reflecting an increase in bad loans, a write-off for goodwill, the costs of eliminating 2,600 jobs and shutting about 200 offices. Loan volume plummeted 49 percent to $19.1 billion.

WaMu, as the thrift calls itself, is one of several large lenders to suffer heavy losses in the mortgage crisis, which has left hundreds of thousands of homeowners unable to keep up with their bills.

The thrift has gradually reduced lending risk, and last month halted subprime mortgage lending, but many of its actions came too late to avoid the brunt of the crisis.

It was also stuck holding billions of dollars of home loans that lost value as risk-wary investors stopped buying them.

Earlier Thursday, Merrill Lynch & Co Inc <MER.N> said mortgage write-downs contributed to a $9.83 billion quarterly loss.

Last month, WaMu slashed its dividend 73 percent and said it would cut 3,150 jobs, now largely made. It ended December with 49,403 employees. It plans to excise $500 million in costs this year, limiting total expenses to $8 billion.

In the interview, Killinger said WaMu may set aside $1.8 billion to $2 billion for credit losses in the first quarter, and may put aside amounts "consistent" with that estimate in each of the following three quarters.

WaMu shares fell 2 cents to $12.44 in after-hours electronic trading.

In regular trading, they closed down 93 cents, or 7 percent, at $12.46 on the New York Stock Exchange. Through the close, the shares were down 72 percent in the 52 weeks, compared with a 33 percent drop in the Philadelphia KBW Bank Index <.BKX>.

BOARD NOT SEEKING SALE

WaMu said credit problems led to a profit decline of 51 percent in retail banking to $278 million.

Earnings in credit cards fell 35 percent to $92 million, and dropped 36 percent in commercial banking to $94 million, though profit in both units rose from the third quarter.

Net interest margin rose to 2.85 percent from 2.58 percent a year earlier, but fell from the third quarter's 2.86 percent.

Analysts have said WaMu might eventually seek a buyer, perhaps JPMorgan Chase & Co <JPM.N>, to extricate itself from its problems. JPMorgan Chief Executive Jamie Dimon said Wednesday he was "very open-minded" about acquisitions.

Killinger declined to comment on merger speculation.

"We are very focused on controlling the things we can control," he said. "Our board has directed management to continue to execute its plan as an independent company."

Last Friday, money-losing Countrywide Financial Corp <CFC.N>, the largest U.S. mortgage lender, agreed to be acquired by Bank of America Corp <BAC.N> for $4 billion.

WaMu ended the year with $327.9 billion in assets, and operates about 2,257 branches. Killinger said he hopes to open another 100 to 150 branches this year.

(Editing by Jeffrey Benkoe, Phil Berlowitz)