June 19 (Bloomberg) -- Washington Mutual Inc., the biggest U.S. savings and loan, cut 1,200 jobs after losses tied to subprime home mortgages.

The Seattle-based company is eliminating positions in California, Florida, Illinois, Texas and Washington, spokeswoman Darcy Donahoe-Wilmot said today in an interview. The reductions represent 2.7 percent of the lender's 45,883 employees at the end of the first quarter.

Washington Mutual, among the top providers of subprime and adjustable-rate mortgages, racked up $3 billion in losses in the past two quarters, cut its dividend twice and stripped Chief Executive Officer Kerry Killinger of the chairman's position. The company is reducing its home-loan division, while focusing on building its retail business and managing expenses, Donahoe- Wilmot said.

The world's biggest financial institutions have reported more than $396 billion in asset writedowns and credit losses amid the worst housing crisis since the Great Depression. Washington Mutual does more than half its mortgage business in California, where home price declines have been among the most severe in the country.

Washington Mutual rose 9 cents to $6.35 at 4 p.m. on the New York Stock Exchange. The stock has tumbled 53 percent this year to a 16-year. It's suffered the fourth-steepest drop in the 24 member KBW Bank Index.

Killinger in April raised $7 billion from a group led by David Bonderman's TPG Inc. after a first-quarter loss of $1.14 billion. The company in December announced plans to eliminate 3,150 positions.

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net.

Last Updated: June 19, 2008 16:56 EDT