After a mega-rally led by the financials that left the XLF up 8.4%, WAMU drops the bomb. I will add to this post as more news is released.
-WAMU 2Q Non-GAAP EPS ($3.34) vs ($1.05)
-$3.33B 2nd Quarter Losses
– Q2 Net Charge-Offs $2.2B
-Q2 Interest Income $2.3B vs $2.03B (perhaps due to negative amortization phantom income)
-Q2 Non-Performing Assets 3.62% as of 6/30
-See Residential Mortgage Portfolio Losses at Upper End of Range
-Q2 Loan Loss Provisions at $5.91B vs $3.51B
-Boosted Loan Loss Reserves by $3.74B to $8.46B
-Has over $40B in ‘readily avail liquidity’ at EOQ (Countrywide had $50B they said in Q1 just before they took the final blow)
-Sees ‘early signs’ of subprime and heloc default stabilization (what they are not telling you is what I have been saying for a few months now, that Alt-A and Pay Option ARM defaults are spiking. Who cares about subprime?).
Remember, WAMU’s CEO can’t lie too much about the numbers because they are being watched too closely by everyone, including the Feds. They also have that God-aweful $7B capital raise they did last quarter hanging over their heads. If I am not mistaken, they owe TPG big time if they raise money under $8.75 per share.
This report was just ugly, except that the CEO said ‘everything will be just fine down the road and we are sufficiently capitalized to manage the crisis.’ How many times have we heard this?
After the full news was released, the stock rallied almost 15% in after-hours trading. The rally is your tax dollars soon to be at work in the form of Paulson’s and Dodd’s massive bailouts.
I think it’s time for the banks, after such a massive rally that took many of the hardest beaten banks back to their 2008 highs, to raise ‘equity’ capital. They may not get another chance at these levels. A week ago their stock prices made it prohibitive. Watch out shareholders, you are always the last to know and have the most to lose.
If I were a bank CEO knowing that my mortgage loan default and REO numbers are growing, housing is continuing to weaken, the economy is weakening and the credit and stock markets are on shaky ground, I would be throwing out an ‘equity’ capital raise this very moment while my stock price is surging.
Hank Paulson said just yesterday on bubblevision (loosely quoted) ‘I keep saying the same things to the banks as I have for months and that is to sell ‘assets’, de-lever and raise capital’.
Come on banks, hop to it! Why not do it now and start being part of the solution? Many top market forecasters, including Bill King, think this is simply “an SEC-induced short squeeze and dead-cat bounce in a bear market, as back offices scramble to rectify the endemic problem of ‘fails to deliver’ that has persisted for years. Once compliance occurs, it’s ‘goodnight, Gracie’.”
If true, there is no better time than the present to issue shares. Why gamble on an unknown future with your stock price and share holders money? It is easier to shore up your balance sheets now by issuing equity when your stock prices are way up, than spending all quarter figuring out how to put together a ‘good’ earnings report. -Best, Mr Mortgage <>
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