WaMu's "Whoo-Boo?": What Analysts Are Saying

I bet Washington Mutual wishes it hadn't started its "Whoo-Hoo!" ad campaign this summer. The slogan sets the company up for several punchlines: "We're losing money? Whoo-Hoo! Moody's just cut us to junk? Whoo-Hoo!"

Here is the latest from analyst reports in light of WaMu's assurances that it is well-capitalized.

From Merrill Lynch:

"Spontaneous release signals further weakness...Where there is smoke there may be fire." Specifically, the report says "Q3 looks to be shaping up to be yet another disappointment; higher credit losses, asset impairment, necessary reserve build and generally depressed earnings. Positively, deposits appear stable, though are coming at a steep price. WM is about 0.65% higher than the next competitor for short-dated CD’s, which we take as a clear sign of stress." And then this zinger: "It’s probably worthwhile to be on the lookout for any announcements over the weekend, as that is a popular time to arrange marriages."

Or takeovers. As you may recall, the FDIC waited until after the close on a Friday to take over Indymac, so it could have the weekend to move in.

By the way, the FDIC web sitesays 76 percent of all WaMu deposits are insured. That is well over $100 billion and a whole lot more than the $45 billion in the FDIC fund. Not that it would ever come to that.

On the other hand, Fox-Pitt Kelton found WaMu's projections "reassuring":

"WM long ago stopped trading on fundamentals, in our opinion, but the Q3 update just released should calm some of the hysteria surrounding the stock and the company's future. The update provided reassuring trend data on credit, deposits, liquidity and non-interest income....Although not out of the woods yet, WM appears to be moving in the right direction on credit and 2008 is likely to be the peak year for provisioning."

S&P says the new projections did not convince it to change its rating of the firm (BBB-/Negative/A-3), adding that the situation remains challenging: "Market turmoil can overwhelm any improvement in fundamental credit performance," the report says. While the growth in mortgage delinquencies is slowing, "This is partly being replaced by higher provisions on credit card receivables." WaMu says the extra $600 million it's setting aside there is because credit card securitizations are maturing.

Finally, Lehman Brothers weighed in (oh, the irony!), maintaining its Equal Weight rating on WaMu but lowering earnings estimates. "WM expects provisions of $4.5B, $1B above our estimate," the report says, citing the increase in credit card provisions. "Non-interest income is expected to be $1B, well below our $1.4B estimate, with the miss mostly due to impairment on a $282MM GSE prfd position the company had not previously disclosed."

Yes, WaMu apparently has skin in Fannie and Freddie .

"After making these changes, we are lowering our '08 & '09 EPS estimates to -$5.72 & -$0.15 from - $5.13 & $0.00, respectively."

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