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Friday, April 15, 2022 11:39:56 AM
Please provide some details about your claim that TD Bank offered 50B for the East Coast Branches. WMI had equity of about 30B total for the entire company.
Please explain what exactly TD wanted to buy. "branch deals" which occur fairly often in the banking industry generally include the physical branches and the deposits that are connected to those branches. Loans are often excluded from branch deals. An example where they would be INCLUDED is if a commercial banking team was operating out of a branch being sold, then the clients of that team would move over to the acquiring bank and that could include the loans of the clients. WaMu did not really have any commercial banking operations. Most Home Loans were originated out of a Home Loan Center, not a retail branch (although some were dual purpose branches). Home Loans that were kept were put into a centralized portfolio and were not attributed to a branch at that point, while MOST Home Loans were sold. There is zero chance that a Branch Deal would include MSRs for the loans originated by the branch.
So, basically, it's just the deposits. Branch Deals are priced using a "core deposit premium." The purchase price in a branch deal is generally the Book Value of the fixed assets plus a deposit premium of 1.5-3%. So knowing this, you must conclude that a purchase price of 50B means that they had about 3.3TRILLION in deposits at those branches. WaMu's total deposits was about 300M.
Maybe you meant that those branches had 50B in deposits, in which case the 1.5-3% premium would mean a purchase price of 750M to 1.5B.
In THAT case, that would provide a negligible amount of capital for WMI (about a 5% increase), while knocking out 1/4 of the deposits. That would have resulted in a MASSIVE funding shortage. The reality is that WMI never really had a capital issue, but rather the deposit runoff led directly to a liquidity issue, which ultimately was the grounds for the seizure.
So selling branches and deposits makes absolutely ZERO sense. Unless they had an outlet to dump 50B in assets and shrink the balance sheet, the branch deals were a no-go. And to be clear, NO ONE was willing to buy assets from WaMu at that point.
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