WaMu Shares Dive on Mortgage Loss Concerns

June 9, 2008 No Comments »

dive

UBS analyst Eric Wasserstrom sent shares of Washington Mutual to a new low after cutting his estimates and price target for the Seattle-based thrift, Reuters reported today.

Wasserstrom noted that WaMu could stand to lose $27 billion through the first quarter of 2011, including $21.7 billion related to its flagging home loan portfolio, composed primarily of loans (option arms) from hotspots like California and Florida.

The UBS analyst noted that the loss estimates are above WaMu’s projected range of $12-$19 billion, but could climb even higher as borrowers across all income classes continue to struggle in the face of a recession.

He cut his 12-month price target on the savings and loan to $8.50, down from $11, but kept his neutral rating on the stock.

Additionally, he bumped his second quarter loss estimate to $1.12 a share from 91 cents, and his 2008 loss estimate to $4.45 from an even four dollars.

The one sliver of good news is that he doesn’t believe the bank and mortgage lender will need to raise additional capital beyond their recent $7 billion infusion from TGP.

Shares of WaMu fell 83 cents, or 11.02%, to $6.70 in early afternoon trading on Wall Street, valuing the thrift at just over $7 billion.

(photo: orinrobertjohn)

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