6 percent per year and the stock price nearly tripled

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: s rapid growth. Under the financial leadership of CFO William Longbrake, its assets grew 10-fold (to $220 billion) in a recent 5-year period, earnings rose an average of 18.6 percent per year, and the stock price nearly tripled. How has WaMu’s management team increased shareholder value so much? Four major acquisitions played an important role in adding branch networks. Greater penetration in existing markets has also been a driver. Another differentiating factor is the “pay for performance” plan that Longbrake introduced. The compensation plan encourages all employees, from managers to tellers, to cross- sell products and to give customers the highest level of service possible. As a result, the number of customers and the profits per customer have soared, helped along by a clever advertising campaign that emphasizes WaMu’s personal service. But it’s not enough to grow revenues if expenses aren’t under control. At the same time as its revenues grew, the bank’s operating efficiency improved significantly, the best among WaMu’s major competitors. Longbrake and his financial managers continually look for ways to boost revenues and improve earnings. A successful campaign to increase noninterest income from depositor and other retail banking fees, which are not subject to interest-rate movements, lessened the effect on earnings of changes in interest In Practice rates. Another strategy was to sell off all but the most profitable single-family mortgages in the bank’s loan portfolio. In spite of interest-rate fluctuations in 2000, WaMu earned $1.9 billion—its most profitable year ever. The bank continued to post record results in 2001, as interest rates fell, by increasing mortgage origination and refinancing activities. As a result, the firm even increased cash dividends at a time when many companies were cutting them. Clearly, Longbrake and his managers’ actions were effective in creating value for WaMu’s shareholders. Sources: Adapted from Stephen Barr, “...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online