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Washington Mutual Inc., the Seattle-based bank that lost a third of its value this week and dismissed CEO Kerry Killinger, reports it is "well capitalized" and expects the growth of net charge-offs to slow to less than 20% in the third quarter ending Sept. 30. In the second quarter ended June 30, charge-offs soared nearly 60%. The company, which will release third quarter results Oct. 22, expects to set aside some $3.4 billion for losses in the residential mortgage portfolio, down from $5.5 billion in the second quarter. Credit card losses, however, are expected to increase, requiring the bank to set aside an additional $600 million. WaMu expects the total loan-loss reserve to rise to $10.3 billion at the end of the third quarter from $8.5 billion in the previous period. On Sunday, WaMu named Alan Fishman, who served as president of Sovereign Bank, to replace Killinger as CEO. The next day, WaMu signed a memorandum of understanding with its chief regulator, the Office of Thrift Supervision, requiring the bank to improve risk management and compliance and give the agency a multi-year business plan with forecasts on earnings, asset quality and business-unit performance. In the second quarter, WaMu's card-services group posted a net loss of $175 million versus net income of $133 million in the same period a year earlier. WaMu reported $169 million in credit card charge-offs for the second quarter, a 59.4% jump from $106 million in the year-ago period. Meanwhile, JPMorgan Chase & Co. entered into advance discussions to buy WaMu, according to CardLine sister publication American Banker.
