Earnings Preview: Washington Mutual

Washington Mutual (WM) is expected to report Q2 earnings after close Tuesday, July 22, with a conference call scheduled for 5:00 pm ET.

Guidance

Analysts are looking for EPS of ($1.05) on revenue of $3.60B. The consensus range for EPS is ($2.40) to (43c), while the consensus range for revenue is $3.55B to $3.63B, according to First Call.

Analyst Views

Two research firms issued notes last week suggesting that Washington Mutual may face substantial difficulties in the near future. Washington Mutual will have to add a substantial amount to its reserves in Q2 and for the entire year, Lehman Brothers predicted. The firm forecasts that the bank will report total losses of $26B on its current balance sheet, including $21B of losses from mortgages. Washington Mutual will not need to raise more capital, according to Lehman, but the firm predicts the bank will report a Q1 EPS loss of ($1.48), and they do not think it will become profitable again until 2H09. Ladenburg Thalmann analyst Richard Bove's calculations suggest that Washington Mutual may be on the verge of becoming a failure risk. Washington Mutual responded to Bove's analysis by noting that it recently raised $7.2B in capital, while its tangible equity to total tangible assets ratio was 7.8% as of June 30.