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July 23, 2004
Stung by heavy losses in its mortgage-banking unit, Washington Mutual said yesterday it will close 100 loan centers across the country and cut as many as 4,900 jobs.
About WaMu 2,400 employees, including 122 in Western Washington, were told last quarter their jobs would be eliminated, said WaMu spokesman Adrian Rodriguez.
The loan-office closures, in areas where the giant Seattle-based thrift does not have a big branch-banking presence, will eliminate 1,840 more jobs by the end of September, Rodriguez said. No Washington offices will be affected by that round.
The other 660 or so people who will be let go are at a servicing center in San Antonio that is being closed as WaMu shifts to automated loan processing and management on fewer software platforms.
From now on, Chief Executive Kerry Killinger said in a conference call with Wall Street analysts, WaMu will operate mortgage offices only where it has strong retail-banking operations, to aid cross-selling between account holders and mortgage borrowers.
Over the next two years, he said, the company plans to open 150 new mortgage offices and add 750 new jobs in such areas.
Poor results at WaMu's mortgage division were the main force behind the company's disappointing second-quarter profit figures, released Wednesday.
Although rising interest rates dampened loan volume and hurt other aspects of the mortgage business, Killinger said "an unacceptably high cost structure" in that division exacerbated the problems.
"Until recently, we did not fully comprehend the depth and breadth of these issues and their impact on the profitability of this business in a contracting market," he said.
Other big mortgage players have seen their results suffer because of rising rates and the end of the refinancing boom, but none has been hit as severely as WaMu.
Countrywide Financial — one of the nation's three biggest home lenders, along with WaMu and Wells Fargo — yesterday reported a second-quarter profit of almost $700 million, up 83 percent from a year ago though short of Wall Street estimates.
WaMu shares lost 40 cents yesterday to close at $39.10.
As of June 30, WaMu had 57,274 workers, down 4,100 (excluding a division sold to Citigroup) since the beginning of the year. It has about 5,000 employees in the Seattle area.
WaMu yesterday also announced that Craig Chapman, head of the commercial-loan unit and chief administrative officer, would take over the mortgage business.
Deanna Oppenheimer, who has run the mortgage unit as well as the retail-banking business, will return to the banking side full time.
Killinger underlined his confidence in both Oppenheimer and the company's retail-banking strategy, which focuses on middle-market consumers and small businesses with free checking and an emphasis on service.
He called the division "our crown jewel" and noted its profit was up 25 percent in the second quarter.
But Richard Bove, a banking analyst for Hoefer & Arnett, said WaMu faces much stronger competition for those customers than in the 1990s, when many big banks cut back on service and tried to push customers out of branches toward phone and Internet banking.
"Today, who doesn't give free checking and friendly service?" Bove said.
"Washington Mutual is not the hot knife in soft butter anymore. It's a different environment altogether, and they haven't figured that out yet," he said.
Charlotte Chamberlain, an analyst with Jefferies & Co., went even further: She said WaMu's entire top management needs to go, preferably by selling the company.
"They've made a total pig's breakfast of the past 18 months," Chamberlain said. "This whole thing has been entirely too painful and has gone on entirely too long."
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