WaMu Cards? Receivables Rise as Income Drops

Washington Mutual reported yesterday third quarter net income of $210 million, down 72 percent from $748 million in the same period a year ago. The Seattle-based bank said the decline was due to a weaker housing market and “disruptions in the capital markets.” Total quarterly revenue fell to $3.4 billion from $3.5 billion in the third quarter of 2006.

WaMu increased its provision for loan losses to $967 million from $372 million in the second quarter, due to higher delinquencies, house price trends and 10 percent growth in its loan portfolio. WaMu increased its provision for loan losses in the non-card portfolio to $644 million from $143 million in the second quarter, largely due to weakness in the housing market, including subprime and home equity loans.

WaMu Chairman and CEO Kerry Killinger told the Wall Street Journal that prospects for the fourth quarter don’t look much better. "We are seeing increases in delinquencies and charge offs across the industry, and or expectation is that will continue as long as the housing markets remain weak," said Killinger.

The provision for loan losses for credit cards rose more than 41 percent to $323 million from $229 million in the second quarter due to higher delinquencies and “a lower level of anticipated recoveries,” WaMu reported. The Card Services Group reported net income of $102 million, down by more than 50 percent from $207 million in the same period a year ago. Period-end managed receivables were $26.2 billion, up 18 percent. The 30-day delinquency rate was 5.73 percent, compared with 5.53 percent a year ago. Managed credit losses of 6.37 percent were up from 5.68 percent.

WaMu reported it opened 945,000 credit card accounts in the third quarter, driven partly by higher marketing costs.

Meanwhile, depositor and other retail banking fees grow at a double-digit pace. During the third quarter, the company added 310,000 net new checking accounts for year-to-date growth of over 1.0 million net new accounts.

The Home Loan division lost $348 million compared with a $33 million loss a year ago. Loan volume fell to $26.4 billion from $41.2 billion.

The bank reported total assets of $330.1 billion, down from $348.8 billion a year ago.