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JPMorgan to Acquire Washington Mutual's Deposits
Topics:Mergers & Acquisitions | Banking
Sectors:Financial Services | Banks
Companies:JPMorgan Chase and Co | Washington Mutual IncBy CNBC.com With Wires | 25 Sep 2008 | 07:32 PM ET Font size: JPMorgan Chase will acquire the deposits of Washington Mutual, CNBC has learned. The deal is expected to be announced during a Thursday night conference call at 9:15 p.m. ET. This deal will mark the end of independence for what once was the largest U.S. thrift.
Federal regulators have been heavily involved in putting together the transaction, which comes as WaMu is besieged by a huge number of bad mortgage loans on its books.
The exact details of the deal aren't known as yet, but JPMorgan [JPM 43.46 2.96 (+7.31%) ] is expected to acquire WaMu's deposits and branches, as well as other operations. The deal isn't expected to expected to result in any hit to the bank-insurance fund.
Washington Mutual [WM 1.69 -0.57 (-25.22%) ] had been trying to sell itself the past two weeks. Interested banks included Citigroup [C 19.41 0.45 (+2.37%) ], HSBC Holdings [HBC 81.59 1.79 (+2.24%) ], Toronto-Dominion Bank [TD 62.00 --- UNCH (0) ] and Wells Fargo [WFC 34.12 -0.15 (-0.44%) ].
WaMu came under further pressure to sell Wednesday when Standard & Poor's slashed its credit rating deep into "junk" territory. The thrift replaced its chief executive this month after suffering losses totaling $6.3 billion over the previous three quarters.
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It has projected $19 billion in mortgage-related losses through 2011, but analysts have said credit losses could reach $30 billion.
Complicating the sale process is what to do with the thrift's $227 billion book of real estate loans, more than half of which consists of home equity loans, option adjustable-rate mortgages, and subprime mortgages.
It was not immediately clear how much of WaMu's troubled loans might be eligible for Washington's $700 billion financial industry bailout program.
WaMu has a significant presence in California and Florida, two of the states hardest hit by the nation's housing crisis. But its 2,239-branch network could appeal to many lenders looking to expand in retail banking, especially in the western United States and the New York City area.
WaMu ended August with $143 billion in retail deposits -- roughly triple the size of the entire Federal Deposit Insurance Corp fund that backs customer deposits. It has also said it expects to end the quarter with a "well-capitalized" status well in excess of federal minimums.
© 2008 CNBC
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