Why should WaMu investors stick around? - Top Stocks Blog - MSN Money
 
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Why should WaMu investors stick around?

Posted Apr 07 2008, 02:12 PM by Matt Koppenheffer
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Washington Mutual chief executive Kerry Killinger might as well be standing in front of a "Mission Accomplished" banner today. WaMu shares are skyrocketing on hopes of a $5 billion investment from private equity shop TPG that would give the bank a nice cushion to deal with its massive lending missteps.

While Citigroup, Bear Stearns, and Merrill Lynch may grab most of the headlines because the magnitude of their losses was so great, WaMu has managed to lose an impressive amount of money for a bank of its size. WaMu finished 2007 with a loss of $67 million thanks to loan loss provisions above $3 billion and charge-offs of $1.6 billion.

Meanwhile, the company seems to care far more about Mr. Killinger than its shareholders. After reporting the dismal results for 2007 -- results that took the stock down 70% from where it started the year -- the board of directors concocted a compensation plan that would ignore the effects of the bank's potential loan losses, foreclosed real estate, and restructuring. So in the coming year, while investors will continue to feel the effects of further losses, the executive team can rest easy that their payout won't be crimped by their past strategic decisions.

And it's no wonder that WaMu executives don't have their objectives well aligned with shareholders -- in all, executive officers own just over 1% of the outstanding stock. More shocking is the fact that Mr. Killinger, who has been the CEO of WaMu for 18 years, owns less than 1% of WaMu's outstanding stock, and over 80% of his "ownership" position comes from options that he's been granted.

Meanwhile, a report from The Wall Street Journal noted that if the $5 billion from TPG comes through, Mr. Killinger will be kept at the top post.

Readers might wonder, then, why anybody would want to own WaMu stock at this point. With the stock down so significantly, many investors see it as a lottery ticket. They believe that if the company is able right the ship in any way that the stock will skyrocket. Comments in The Motley Fool's CAPS community show that this belief is held by a number of investors:

  • "Worst case is 20% or so further dilution of stock vs. an 80-100% upside at current prices." (TheBadDad)
  • "This stock has already taken the heat, while other financials are recovering. Washington Mutual is due for a BIG bounce, and overall is a stable company." (gwinternetman)
  • "They will either turn it around or get bought out either way it is up from were they are today." (twanjik)


Despite these bullish comments, there are plenty of members of the community that think it's worth avoiding WaMu. Right now, the stock carries a CAPS rating of just two stars out of a possible five.

In the end, those looking to gamble on WaMu may end up being rewarded for taking the risk -- the stock is already shooting up 30% on today's deal speculation. However, those looking for a good long term investment may want to steer clear of WaMu until Mr. Killinger and the company's board start acting more like agents of shareholders.

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Comments

 

Whether it's WaMu, BofA, Citi, Chase or Wells Fargo, no bank will ever be perfect for the customer, b/c somehow it's never the customer's fault, there's $15 in there checking, but somehow they withdraw $40 from the ATM and then wonder why they get the overdraft charge and blame the bank, c'mon people. All bank's have fee's, some more stiff as other's. Banks are a business, bottom line, there job is to make money off the consumer, and for those people that dont like paying overdraft or NSF charges, pay more attention to your account, if you dont like the banking system, then just keep your money in a shoe box in your closest or in a safe @ your home.

This is exactly why I no longer use ANY bank!!!   I prefer to use only credit unions after carefully screening them out.  Banks are a primary reason we're in this financial hell they've created along with all the other MBAs in the mortgage industry.  What they've done is criminal and I truly hope many go to prison because of their criminal 'white collar' activities (schemes).  It's amazing to me how these CEOs continue to screw shareholders out of MILLIONS, yet they walk away with MILLIONS when they're fired. Disgusting, simply disgusting!!!

I've been with WaMu for seventeen years and now plan to close all of my accounts. I sent a wire transfer on the 3rd. of March and was recieved April 4th.

I lost a substantial amount of money and when I inquired about my lost money for 32 days Hollie West, Bank Manager told me it was in wire space and there was no way to help me. Luckily I also belong to BECU and they saved me from losing me peice of property and earnst money. As soon as my surplus check is deposited I will no longer do business with them. I remember when the customer was important to WAMU, those days are gone.

Tracy in Enumclaw, Wa

I am a long time shareholder of WAMU and I am very disappointed in the way the executives have mismanaged the Company. The Directors are unengaged and clueless. The best thing for the leadership is to dismantled this locomotive piece by piece.  Providian will be next  achilles heel for this trai, just  Long Beach Mortgage and Commercial Capital.   The Board and executive management is sucking te life out this Company.  

Internally, employee morale at WAMU is at its lowest level.  Sooner than later they will have to tap employees pension funds (sounds far fetch - just watch and see).  All the S&Ls that WAMU acquired in the mid-to-late 90s had their pensions retained by WAMU - Ever wonder how the fubds were/are invested.

I am a long time shareholder of WAMU and I am very disappointed in the way the executives have mismanaged the Company. The Directors are unengaged and clueless. The best thing for the leadership is to dismantled this locomotive piece by piece.  Providian will be next  achilles heel for this trai, just  Long Beach Mortgage and Commercial Capital.   The Board and executive management is sucking te life out this Company.  

Internally, employee morale at WAMU is at its lowest level.  Sooner than later they will have to tap employees pension funds (sounds far fetch - just watch and see).  All the S&Ls that WAMU acquired in the mid-to-late 90s had their pensions retained by WAMU - Ever wonder how the fubds were/are invested.

I just got laid off and I still love the company and its culture. Wholesale is dead at Wamu but and I am sure that it was the new investors who made the call to shut it down. Expect more losses this quarter but the bank will survive and grow.Whoo Hoo

it's apparant wamu has hacked off a lot of it's investors and customers. while they take a bath, this Kilinger get's rewarded? how does this board sleep? they should not get any compensation, the bloodsuckers. show some integrity, it looks like these executives want to pass the buck again, instead of making some real changes in their leadership.

If you call customer service after "business hours" good luck getting someone who understands English. They are all Pakistanis ort Indians. I asked to speak to a supervisor who was simply rude. When I aske dto speak to his boss I was told to leave my number and he would return my call in 2 or 3 days. When I asked for his name I was told that he would not give me his name.

Simply amazing for a COMPANY DEDICATED TO SERVICE. Theiy should just cancel thier advertizing and save the money instead of continuing the joke.

My money is out of this bank too before they go belly up.

Yes, I used to work in the Call Center at WaMU, which is in CALIFORNIA. They laid us off, outsourced to the Phillipines and Costa Rica. Gave us a great Severance package and really helped us with the transition. However, it makes me very bitter, it is such a shame, their Customer Service was so damn good, I was proud to be a Wamulian. Such A shame, however we all saw it coming.

I will defend them on the OD fees.  Do not spend the money until after your Direct Deposit has posted.  And Yes IT is correct, it up to the sender when your Deposit hits at Midnight. Actually think of it this way. Your deposit is available at Midnight so that is the day it is available NOT THE DAY BEFORE, and it is not the bank it is the sender so if these people had any sense they would wait until their deposit is in their account.........Just some info.................

I interviewed for a loan officer position in Seattle when they were just a little bank and management was arrogant even then. Then they started buying lots of little banks gave free ATM until you had no choice but to use them. They offered scary loan programs and now they are paying the price. Management will of course go unscathed at the expense of shareholders. No one in their right mind would hold WaMu for the long term. They will be on the chopping block or taken over by a bargain hunter or scratch and dent investor. Stay away from them!

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