Another one from Bloomberg September 20, 2008.
Sept. 20 (Bloomberg) -- Four banks that may bid for Washington Mutual Inc., the Seattle savings and loan that put itself up for sale this month, have another $110 billion to spend after the biggest two-day global rally in 38 years.
JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Banco Santander SA all jumped more than 18 percent, swelling their market values, after the U.S. Securities and Exchange Commission banned short sales of financial firms and federal officials unveiled a plan to bolster bank balance sheets. Talks to pick a WaMu buyer will continue this weekend, and the four lenders are mulling bids, said a person familiar with a matter.
``Everybody now has a much more valuable currency,'' said Michael Kao, a money manager at Akanthos Capital Management in Woodland Hills, California who invests in WaMu securities such as preferred shares. ``It increases the likelihood of a deal dramatically.''
Bank stocks rose worldwide after U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke proposed removing troubled assets from the balance sheets of financial companies. The program may involve government purchases of devalued assets, helping lenders such as WaMu, which by its own estimates may have $19 billion in mortgage losses during the next 2-½ years.
Shorn of the mortgage portfolio, WaMu would be left with the asset bidders covet most: a network of 2,300 branches, mostly on the West Coast, and $143 billion in retail deposits. Howard Shapiro, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, said there have been ``minimal'' withdrawals, based on visits to about 30 WaMu branches, where his team spoke with more than 100 depositors and several branch managers.
``The impediment is, who wants to buy the distressed mortgage portfolio?'' Shapiro, who rates the stock ``overweight,'' said in an interview yesterday. ``If the Treasury is going to take it off their hands, an acquisition is going to be that much easier.''
WaMu yesterday added $1.26, or 42 percent, to $4.25 as of 4:02 p.m. in New York Stock Exchange composite trading, inflating its market value to $7.2 billion -- more double what it was worth at the close of trading two days earlier. Two of yesterday's biggest trades occurred just before the close, lifting the stock by more than 50 cents, Bloomberg data show. They accounted for about 8 million of the 204 million shares that changed hands yesterday.
Merge to Survive
WaMu spokesman Brad Russell declined to comment, as did JPMorgan spokesman Joseph Evangelisti and Wells Fargo's Julia Tunis Bernard and Citigroup's Shannon Bell. A Santander spokesman in Madrid declined to comment and wouldn't be quoted by name, citing company policy.
Banks may have to merge to survive after the credit crunch led Lehman Brothers Holdings Inc. to bankruptcy, Merrill Lynch & Co. to a buyout and American International Group Inc. to a government takeover. Morgan Stanley, meantime, is weighing an alliance with Wachovia Corp., a person familiar with the matter has said.
WaMu, led by new Chief Executive Officer Alan Fishman, 62, removed an obstacle to any sale last week when TPG Inc., its biggest shareholder, agreed to waive a $1.5 billion payment it had negotiated if the lender is sold. WaMu accepted a $7 billion TPG infusion in April after rebuffing a takeover offer by JPMorgan CEO Jamie Dimon. JPMorgan
Fitch Ratings cited the waiver on Sept. 18 in placing WaMu's credit rating on watch, saying the move removed an ``important hurdle'' to a potential sale. ``Any feasible buyer would more than likely have much stronger credit ratings,'' Fitch said in a statement. Morgan Stanley analyst Betsy Graseck wrote in a Sept. 14 report that JPMorgan would benefit from a presence in the West and Southeast, home to most of Washington Mutual's branches. ``A potential acquisition of WM would be a strategic positive for JPM,'' wrote Graseck, who rates the shares ``overweight.''
``JPMorgan is in a position of pretty good strength,'' she wrote. ``It would be a market expansion for their branch footprint.'' WaMu is being advised by Morgan Stanley and Goldman Sachs Group Inc., a person familiar with the talks said. Goldman, which advised WaMu on the TPG investment, declined to comment through spokesman Michael Duvally.
To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net; David Mildenberg in Charlotte at dmildenberg@bloomberg.net
To contact the editors responsible for this story: Otis Bilodeau at obilodeau@bloomberg.net; Rick Green at rgreen18@bloomberg.net.
