Webster Financial Corp. is erasing its national wholesale mortgage business, with plans to close lending offices in Cheshire, Chicago, Phoenix and Seattle.
The company plans to retain space in Cheshire to handle direct retail lending. Webster said it would try to find positions elsewhere in the bank for 100 Cheshire employees, even as it announced an “earnings optimization program” that is likely to lead to job cuts down the line.
Webster has now moved $424 million in loans into a liquidation portfolio and expects losses to occur over two years before diminishing in 2010 as loans are resolved or repaid. Anticipating $50 million in charges against earnings, Webster is curtailing a stock buyback program.
“We have identified, segregated and reserved against estimated losses inherent in these portfolios using default rates and loss rates that reflect our view that such rates will significantly worsen from current levels,” said James Smith, CEO of Webster Financial. “By separating the liquidating portfolios from the ongoing loan portfolio we are able to underscore the soundness of the ongoing loan portfolio and the adequacy of the reserves.”
Based in Waterbury, the company”™s Webster Bank subsidiary has the second-most deposits in Connecticut after Bank of America Corp., and numbers among the six largest banks in Fairfield County as ranked by deposit market share. Subsidiary Webster Financial Advisors has its main office in Stamford.
Webster had already revealed plans to end indirect residential construction and home equity lending outside New England; and to dump its insurance arm, which has offices in Westport and Harrison, N.Y.
The bank is hardly alone in its woes ”“ according to the Federal Deposit Insurance Corp., loss provisions nationally hit a 20-year high in the third quarter.
In the third quarter, Webster had a $35 million profit, up from $8 million a year ago.
