Randy Kirk

WaMu Acts Tough, but Are There Heavier Losses Around the Corner?

I noted WalMu funds approximately 2/3 of its assets from deposits (mainly CD's) and 1/3 from loans -- this 1/3 from loans may be causing some concern. WalMu has a level of control over its deposit source of funds, but the loan portion, generally there will be a lot of covenants in there that WalMu may be close to hitting.

Also noted, WalMu is highly levered like most financial institutions at 14.3x assets to equity (or 22.8x assets to net tangible equity), at the end of 3Q07. With this sort of leverage, it does not take much movement in the price of assets to significantly impact equity.