Thursday, October 19, 2006

wamu in trouble

so langsam wird es auch für die letzten ersichtlich das es hier nach ärger im bankenland riecht....

smells like "trouble in bankland"

WaMu Profit Tumbles 9%

today reported third quarter 2006 net income of $748 million, or $0.77 per diluted share compared with net income of $821 million, or $0.92 per diluted share, in the third quarter of 2005.

The provision for loan and lease losses of $166 million in the third quarter reflected a slight decline in the loan portfolio and net charge-offs of $154 million. The third quarter provision also reflected refinements to the company's reserve methodology and adjustment of the provision related to the planned sale of $403 million of higher risk credit card accounts

Nonperforming assets were up during the quarter and as a percentage of total assets totaled 69 basis points at quarter end, compared with 62 basis points at the end of the prior quarter and 52 basis points at the end of last year's third quarter.

the slowing housing market and competitive factors exerted downward pressure on the company's third quarter gain on sale (finally the mbs market is waking up...)

credit card:
Credit quality continues to be favorable. At 5.53 percent of period end managed receivables, the 30+ day managed delinquency rate was up compared with the prior two quarters (2005 5,18%)

home loan group:
The difficult rate environment, including an inverted yield curve, contributed to the quarter's net loss of $33 million. from 303 mio$ profit ,wow!!!

net interest income was down 57 percent year over year reflecting the significant decline in warehouse loan balances and lower net interest margin.

The 10 percent decline in loan volume from the prior quarter and 34 percent decline compared with a year ago reflected the slowing housing market

Lower gain on sale margins. Gain on sale of $119 million was down from $251 million in the prior quarter and $279 million a year ago. Loans sold in the third quarter of $30.24 billion were down 7 percent from the second quarter and down by about a third from a year ago

thanks to by P'cola Popper
2006-10-18 13:31:45
Although the nine month numbers are not posted up on their website WAMU booked $428 million and $72 million of “capitalized interest income from option adjustable-rate mortgages” for the six months ending June 30, 2006 and June 30, 2005 respectively per the cashflow statement. Net income for the two periods was $1,752 million and $1,745 million for the two periods. Wishful income has increased from 4.1% to 24.4% of net income.

more on this topic

Here's how this has played out over the past few years via WaMu's ARM loans (data via Washington Mutual's annual report):

- 2003 year end, 1% of WaMu's option ARMS were in negative amortization (payments were not covering interest charges, so the shortfall was added to principal).

- 2004, the percentage jumped to 21%.

- 2005, the percentage jumped again to 47%. By value of the loans, the percentage was 55%.

So each month, the borrowers' debt increases; Note there is no strict disclosure requirement for negative amortization -- Banks do not have an affirmative obligation to disclose this to mortgagees.

2006 ?

dank geht an joe

3) Capitalized interest recognized in earnings that resulted fromnegative amortization within the Option ARM portfolio totaled$278 million, $239 million and $86 million for the three monthsended September 30, 2006, June 30, 2006 and September 30, 2005.
(3) Capitalized interest recognized in earnings that resulted fromnegative amortization within the Option ARM portfolio totaled$706 million and $159 million for the nine months ended September30, 2006 and September 30, 2005.
(2) The total amount by which the unpaid principal balance of OptionARM loans exceeded their original principal amount was $654million at September 30, 2006, $461 million at June 30, 2006,$291 million at March 31, 2006, $157 million at December 31,2005, and $76 million at September 30, 2005.

update conference call:

optioan arms 30% of all new loans flat yoy
hybrid arms spiking from 29% to 44$
fixed rate down form 39% to 26%

credit provisioning from 700 mio in 06 to an estimate of 850-950 mio$ (with a strong economy...)

not one analyst has asked how big the amount of "capitalized interest is.

74 b$ optioan arms are currently in the books.
new production of optioan arms is sold to the mbs market

wamu does no optioan arm in their subprime division

no groth seen in 07

the average ltv on their option arm portfolio is 57% with a 707 fico. lets hope that the underlying value is from 06 and not 2005 or 2004 .... :-)

underwriting option arms on fully indexed rate

new "guidelines" little impact on optioan arms, but maybe for their subprimedivision (hybrids!!!!)

more details and insights from russ winter


Blogger dcxavier said...

It's worse than that. Although WAMU has been moving away from prime single family to sub-prime, HLOC and multi-family (see recent 8-K and last night's release), they REDUCED reserves by $100M last quarter, 0.68% to 0.64% of assets, despite rising non-performing assets. This bank is a mess.

8:10 AM  
Blogger jmf said...

i agree 100%!

8:17 AM  
Blogger powayseller said...

ltv might be 57%, but I bet that CLTV is closer to 100%. CLTV is combined loan to value, a different term from LTV, and includes all loans. LTV is ONLY the FIRST MORTGAGE. Too bad none of the analysts asked about CLTV, because everyone was clearly fooled by this. Even Fannie Mae only tracks LTV...

4:13 AM  
Blogger jmf said...


6:23 AM  

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