Mr. Bove predicts that WaMu will lose $40 billion over the next three years on its loan portfolio. If the economy weakens further and losses are even higher, he said, "the future of the company is questionable."WaMu's current portfolio is about 240 billion. The above scenario would be a 6% annual loss in principal balance, or about $14 billion per year.
It looks like WaMu's portfolio interest income this year will be about 15B. WaMu has socked away 8B for loss reserve, so that will blunt the losses somewhat.
To give you a sense just how difficult this cycle has been for mortgage banking, note that WaMu is a 100 year+ old bank that lived through the Great Depression...
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