Washington Mutual Profit Rises in Quarter

Washington Mutual Inc., the largest U.S. savings and loan and the No. 2 mortgage lender, said Monday that its first-quarter profit rose 5%, led by growth in its retail banking and financial services units.

Defying analysts’ expectations, the Seattle-based banking company said net income totaled $1.05 billion, or $1.18 a share. That was an increase from $1 billion, or $1.07, a year earlier. Analysts had forecast the bank would earn only $1.01 a share.

Several market watchers had expected that a decline in Washington Mutual’s mortgage originations would undercut the bank’s performance.

“We made significant, early progress in our efforts to reduce our cost structure and streamline operations, while maintaining our high standards for customer service,” said Kerry Killinger, Washington Mutual’s chairman, president and chief executive, in a statement.

“We believe the solid foundation established in the first quarter provides momentum for the remainder of 2004.”

Washington Mutual’s first-quarter results included $644 million in pretax income from discontinued operations from a former subsidiary, Washington Mutual Finance Corp., which was sold in the quarter.

This income was partly offset by $68 million in pretax restructuring and tech-related charges, plus a pretax charge of $89 million because of the early retirement of certain Federal Home Loan Bank borrowings, and a pretax reduction of $107 million in non-interest income because of an accounting change.

The bank also announced a cash dividend of 43 cents a share on its common stock, up from 42 cents previously, and payable to shareholders of record on April 30.

Washington Mutual said its assets in the first quarter grew by $9.77 billion, or 4%, to $280.77 billion. But its total loan volume fell to $62.17 billion in the first quarter from $108.78 billion a year earlier and $69.90 billion in 2003’s fourth quarter.

According to the bank, the quality of its credit improved in the quarter. The percentage of nonperforming assets to total assets declined to 0.66% in the first quarter, an improvement from 0.70% as of Dec. 31, 2003, and 0.86% as of March 31, 2003.

Deposits rose by $7.8 billion to $160.98 billion as of March 31, with loans held in portfolio rising to $187.46 billion, Washington Mutual said.

Net interest, or lending, income fell to $1.73 billion from $1.99 billion a year earlier.

Washington Mutual’s stock rose 40 cents to $40.75 on the New York Stock Exchange before earnings were announced.