Washington Mutual, one of the largest US home mortgage lenders, is to slash its dividend by almost three-quarters, cut 3,150 jobs and raise $2.5 billion in new capital as it sees losses from mortgages increasing in 2008.
The bank said a sharp downturn in demand for mortgages was forcing it to eliminate 2,600 mortgage and 550 corporate support jobs, or 11% of its entire staff, close 190 of 336 mortgage offices and stop making loans to borrowers with sub-prime, or poor credit.
The company is also reducing its dividend payout by 73% to 15 cents a share. At the old rate, its beaten-down shares had offered a dividend yield of nearly 12%. Washington Mutual was the 6th largest US mortgage company for the first nine months of 2007, according to the trade publication Inside Mortgage Finance.
Washington Mutual expects a weak market to get even worse next year, forecasting that mortgage originations nationwide would fall 40 percent to $1.5 trillion.
Moody's Investors Service yesterday cut the long-term debt ratings of WaMu by two notches, bringing the bank's ratings closer to junk status.
