Washington Mutual Inc. said Monday it is laying off 3,150 workers and issuing $2.5 billion in preferred stock as part of efforts to cut costs and raise capital in the face of mounting losses in mortgage lending.
WaMu will said it would close 190 of its 336 home loan centers and sales offices and nine home loans processing and call centers, as fourth quarter charge-offs for loan losses are expected to hit $1.6 billion, or twice the amount previously expected.
The layoffs include about 2,600 positions in home loans — more than one in five employees in that group — plus 550 corporate and support positions.
As part of “a significant change in the strategic focus of its home loans business,” the bank said it is discontinuing all remaining lending through its subprime mortgage channel, and closing WaMu Capital Corp., its institutional broker-dealer business. Also targeted for closures is WaMu’s mortgage banker finance warehouse lending operation.
The Seattle-based bank, which is increasing provisions for first quarter 2008 loan losses to between $1.8 billion to $2 billion, said it expects to reduce expenses by $500 million in 2008.
The company’s board will slash the quarterly dividend rate — most recently 56 cents per share — to 15 cents per share, and issue $2.5 billion in preferred stock in the hopes of raising $3.7 billion in equity.
WaMu Chairman and Chief Executive Officer Kerry Killinger said in a statement that the moves would better position the company grow its retail banking business.
In September, WaMu announced 1,000 layoffs in its home loans group as it closed its mortgage banker finance business and restricted WaMu Capital Corp. to securitizing only WaMu loans (see Inman News story).
The company said at the time it would hire up to 1,000 retail and banking loan consultants over the next several months and increase its consumer direct sales force.
The latest layoffs and restructuring, to be completed by March 31, will cost WaMu $90 million during the fourth quarter to implement, the company said in a regulatory filing. The cost is divided roughly equally between termination benefits, lease termination and other decommissioning costs, and fixed asset write-downs.
Resizing the home loans group will require the company to write down by about $1.6 billion the goodwill associated with that business, WaMu said.
WaMu anticipates that mortgage originations by all lenders will shrink about 40 percent in 2008, to $1.5 trillion.
Mortgage lenders had already announced more than 80,000 layoffs through November of this year, according to outplacement consulting firm Challenger, Gray & Christmas, Inc. (see Inman News story).