NEW YORK, July 23 (Reuters) - Standard & Poor's on Wednesday cut its counterparty credit rating on Washington Mutual Inc (WM.N: Quote, Profile, Research) to just a notch above junk on the thrift's higher than expected second-quarter losses.

The largest U.S. savings and loan posted a $3.33 billion second-quarter loss on Tuesday as souring mortgages forced it to set aside more money for loan losses. For details, click on [ID:nN22322548].

The one notch downgrade by S&P to "BBB-minus" follows announcement by rival rating agency Moody's Investors Service on Tuesday that it may downgrade the thrift to "junk" status. S&P also cut short-term rating to "A-3," the fourth highest rating, from "A-2."

S&P said its current ratings reflect expectations that the thrift will post a loss in 2008 and will return to profitability in 2009.

However, if residential mortgage credit losses exceed the expected $19 billion loss, the ratings may drop lower, the rating company said.

"Clearly the length and duration of this historical weak housing market will weigh heavily on WAMU's profitability," S&P said.

The outlook is stable, indicating an additional ratings change is not anticipated over the next two years.

"Given the longer duration of this current weak housing cycle and the outlook for 2009 earnings to be below historical norms, a positive rating action is not probable during the next year," it added.

S&P said the thrift's holding company has liquidity capacity to meet its obligations without accessing the capital markets through 2012.