$7bn cash injection for US lender

WaMu is one of the biggest mortgage lenders in the US

US mortgage lender Washington Mutual (WaMu) is to receive $7bn (£3.6bn) in new capital from a consortium led by a private equity group, TPG.

The firm has been hit hard by rising defaults on its mortgage loan book and is taking steps to secure its future.

It is closing its free-standing home loan offices and cutting three-month dividend payments from 15 cents to one.

The bank said it would lose $1.1bn in the first three months and is making provision for another $3.5bn of losses.

It also plans to stop offering mortgages through brokers.

"This substantial new capital, along with the other steps we are announcing today, will position us for a return to profitability as these elevated credit costs subside," chief executive Kerry Killinger said.

'Getting serious'

WaMu announced at the end of last year that it would lay off 3,150 staff.

It had already cut its quarterly dividend to 15 cents from 56 cents per share.

"These companies are getting serious," said James McGlynn, from Texas-based Summit Investment Partners.

"They are bringing in capital, [and] getting out of businesses where they weren't efficient. It just seems like they are getting their comeuppance," he said.

Shares in Washington Mutual fell as much as 13% at one point in New York and, in lunchtime trading, were down $1.11 at $12.04.