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New job cuts and closures at WaMu

By Drew DeSilver
Seattle Times business reporter

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The giant Seattle-based financial institution said yesterday it would close all 53 of its commercial-banking offices nationwide, reorganize its commercial-real-estate arm and stop making loans to professional homebuilders.

About 850 workers, including more than 140 in the Seattle area and 30 or so elsewhere in Western Washington, will lose their jobs as a result, spokesman Alan Gulick said.

All of the office closures and most of the layoffs will take place within the next 90 days, he said.

Last week, in the wake of a disappointing second-quarter profit report, WaMu said it would shut 100 home-loan centers across the country, trim other operations and cut as many as 4,900 jobs.

On Wednesday, American Home Mortgage said it would buy most of those home-loan offices and try to hire some of their 500 workers.

Although single-family mortgages account for the great bulk of WaMu's loans, the company also lends money to homebuilders, mortgage bankers and developers of multifamily housing and office buildings.

Except for the homebuilder loans, Gulick stressed, "we are not getting out of the commercial business."

The commercial-banking offices are in 14 states; Washington has 13 of them from Bellingham to Vancouver. They primarily serve customers with $5 million or more in sales.

WaMu will serve those customers through its phone and Internet operations, Gulick said. Small businesses will be served though WaMu's retail branches.

The commercial-real-estate team will concentrate on writing loans for WaMu to retain in its own portfolio, rather than packaging loans into mortgage-backed securities and selling them to outside investors.
 
The commercial-banking group posted a $187 million profit in the second quarter. But, as analysts noted, it's a small part of the overall business.

In the second quarter, homebuilder loans accounted for less than 1 percent of WaMu's total loan portfolio, and multifamily loans for 10.9 percent.

"Commercial banking has been something they've done on the edges, but not in a big way," said Paul Miller, an analyst with Arlington, Va.-based Friedman Billings & Ramsey. "They are trying to focus on things they know really well, because the management has been stretched thin."

Robert Napoli, a banking analyst with Piper Jaffray in Chicago, added that WaMu likely wouldn't be downsizing its commercial operations if the problems in its home-mortgage unit weren't forcing it to focus mostly on two key areas: fixing the mortgage business and continuing to grow retail banking.

WaMu shares gained 36 cents yesterday to close at $38.85.

That share price, Miller said, reflects widespread rumors on Wall Street that WaMu is being prettied up for a sale.

Rumors have run rampant that the big thrift will be bought, perhaps by Citigroup or the British banking conglomerate HSBC.

"The chatter out there is that Washington Mutual is for sale," Miller said. "The question is whether it's now, a year from now or later. I don't think Washington Mutual can go forward on its own."

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com