More firms enter the confessional
Washington Mutual said its third-quarter profit plunged 75% from a year earlier. The culprits: Its loan loss provision will come in at $975 million due to poor credit performance on its subprime mortgages and home equity loans. The firm will also take a $150 million writedown on the value of mortgage loans that it's holding on to, rather than selling, because secondary market conditions have deteriorated ... a $150 million loss on the value of its trading securities ... and yet another $110 million hit on mortgage backed securities held for sale.
Meanwhile, Merrill Lynch took its own bath in the quarter. It said it will lose as much as 50 cents per share thanks to souring conditions in the Collateralized Debt Obligation (CDO), subprime mortgage, and leveraged finance markets. It took a whopping $4.5 billion write-down for its exposure to the CDO and subprime mortgage market. It also took a $463 million hit on risky corporate lending commitments.