Fitch Ratings Affs Washington Mutual Finance On Sale Of Subsidiary.Business Editors CHICAGO--(BUSINESS WIRE)--May 23, 2002 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed its 'A' rating for WAMU WAMU Washington Mutual WAMU West African Monetary Union Finance Corp.'s (WM Finance) senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. , 'A-' rating for its subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". and 'F1' rating for its commercial paper following the announcement that the company has signed a definitive agreement to sell its industrial banking subsidiary. The First Community Industrial Bank is a thrift with approximately $420 million in assets and provided approximately $7 million in operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. . The industrial bank did not fit into the strategic direction of WM Finance. The Rating Outlook for WM Finance remains Stable. WM Finance is a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Washington Mutual “WaMu” redirects here. For the Washington, DC radio station, see WAMU. Washington Mutual (or WaMu; NYSE: WM) is the United States' largest savings and loan association. Inc. (WAMU). The ratings and outlook of WM Finance, although not guaranteed by WAMU, are strongly dependent on the parent company. With total assets of more than $275 billion at March 31, 2002, WAMU is the largest thrift in the U.S., operating more than 2,000 consumer banking, mortgage lending, commercial banking, and consumer finance locations. Earnings in 2001 and for the first quarter ending March 31, 2002, declined noticeably from the previous year. The company's net interest margin declined sharply, due to pricing pressure and the effects of higher refinancing costs in 2001, combined with higher provisioning and operating costs. The reduction in WM Finance's net interest margin is also a result of the company's strategy of increasing the size of lower-yielding real estate-secured loans. The increase in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. was mainly due to technology investments company wide and increased use of direct mail to reach new markets. Asset quality, as measured by total net charge-offs and delinquencies, has shown some weakness during 2001 and for the first quarter ending March 31, 2002. The decline in asset quality was mainly in the unsecured portfolio and a portfolio of real estate secured loans purchased during 2000. Net losses to average receivables increased to 4.07% for the three months ending March 31, 2002, from 3.11% for the comparable period in 2000. Given the economic slowdown taking place, Fitch would expect losses to rise from the present levels. WM Finance has supplemented internal growth with some small portfolio purchases. The success of these purchases has been mixed, as the company experienced problems with a portfolio that was purchased in the early part of 2000, which was part of the reason reported delinquencies and losses increased from year-end 2000. Capitalization is conservative, and while the company is likely to increase tangible leverage, as measured by debt to tangible equity, Fitch expects the company to remain well within appropriate levels for its current rating. WM Finance maintains a diverse funding profile. The treasury operations function of WM Finance is integrated with that of its parent company. The bulk of WM Finance's financing is through senior debt, although the company will use commercial paper. The company's commercial paper program is more than 100% backstopped by a revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility with a syndicate of 25 banks. |
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