Washington Mutual on Monday said it expects annual earnings to be lower than its previous guidance, due to the significant impact of increased interest rates on its mortgage banking business.
Higher interest rates have lowered the company’s mortgage production expectations at a time when cost reduction plans have not yet fully taken effect.
The rise in interest rates is not expected to have a material effect on the 2004 performance of the company’s retail banking and financial services and commercial group businesses.
“It now appears to us that the shift in the interest rate environment in recent months, with a sharp increase in long-term rates and a related reduction in mortgage volumes, will continue through the rest of the year. The effects of these changes are likely to outpace the timing of ongoing cost reduction plans in our mortgage banking business,” said Kerry Killinger, chairman, president and chief executive officer.
“We’re disappointed in this change in our 2004 outlook and we will not be satisfied until we have completed the resizing of our expense base and improved the efficiency and performance of our mortgage banking business,” continued Killinger. “At the same time, we will remain focused on executing our core middle-market retail strategy.”
Earnings for the full year are now estimated to range from $3 to $3.60 per diluted share.
The company will report its second-quarter earnings results on Wed., July 21, after market close.
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