Analyst Questions WaMu?s Liquidity, Sending Shares Lower

Shares of Washington Mutual (NYSE: WM) Thursday suffered from a report that creditors had been pulling funds from the Seattle, Wash.-based financial institution.

Corporate bond newsletter Gimme Credit questioned the thrift’s liquidity going forward. “We would be remiss if we did not observe that many creditors have quietly been pulling funds from the bank,” wrote analyst Kathleen Shanley. She added that WaMu’s federal funds purchased and commercial paper fell to $75 million by the end of the second quarter, compared to $2 billion six months earlier.

As a result, the company’s stock had blocked from $4.50 a share to well below $4 a share before rebounding late in the day. In early trading Friday, the company’s shares were weaker again, trading at about $3.85 a share.

The thrift responded in a prepared statement: “WaMu funds all of its business through commercial banking operations and does not rely on commercial paper.”

The Gimme Credit report was one of multiple blows for the financial institution this week. Late Tuesday, Moody’s Investor Services put WaMu’s senior unsecured rating of Baa3 on review for a possible downgrade.

Moody’s action followed WaMu’s quarterly financial report, which revealed $3 billion in losses due to increases in loan loss reserves (“Washington Mutual Reports $3.3 billion Loss, But Active Credit Card Business,” July 23).