WaMu expects surge in ’08 credit card losses
Washington Mutual announced late yesterday that it suffered a fourth-quarter net loss, stemming from trouble in the housing market, and said that it anticipates a surge in credit card losses for 2008. Amid the nationwide credit crunch, mortgage lending giant WaMu took a $1.6 billion quarterly charge to cover bad loans.
Demand for credit cards appeared to slow somewhat in the final months of 2007, with WaMu saying that “Card Services opened 653,000 new credit card accounts, or 292,000 less than in the third quarter.”
Consumers not only were less likely to open a new credit card account, but also are less likely to pay back the money borrowed on existing cards. Echoing the cautious stance taken by several other credit card issuers, Washington Mutual warned that consumers will likely have trouble repaying their credit card debt this year. “WaMu sees credit card losses rising to 8.5 percent to 9.5 percent of its portfolio in 2008 from 6.9 percent in the fourth quarter, Chief Financial Officer Tom Casey told analysts during a conference call Thursday,” The Wall Street Journal said.
According to the Journal, Casey called unemployment the “most significant external factor affecting the performance of our card portfolio.”
Some analysts worry that job concerns could prevent consumers from spending. Apparently, employment fears may also keep cardholders from paying off their credit card debt.