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UBS Downgrades Washington Mutual to 'Neutral'


UBS Financial downgraded Washington Mutual (WM) to neutral from buy.

Washington Mutual agreed to sell its consumer-finance unit to Citigroup. Analyst Eric Wasserstrom says he downgraded the company on valuation. At the same time, he upped the $49 target to $51, which is supported by his discounted cash-flow model, and equates to a p-e of 10.6 times his $4.80 2004 earnings per share estimate.

Wasserstrom maintains the $4.42 2003 earnings per share and $5.35 2005 estimates. He says his outlook for WaMu remains positive, based on a view that the company will continue to grow earnings per share at about 10% annually and will continue its transition from a thrift bank to retail bank. Also, Wasserstrom says while a takeout of WaMu -- as discussed in a recent Reuters story -- would be a risk to his downgrade, he doesn't believe this risk is imminent.


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