JPMorgan will take over thrift
JPMorgan Chase & Co. acquired the assets of Washington Mutual Inc.’s banking operations Thursday after federal regulators seized the ailing thrift, the country’s largest.
The deal marks the second time in six months that JPMorgan Chase has taken over a financial institution crippled by bad mortgage bets.
The deal will cost JPMorgan Chase $1.9 billion. The Federal Deposit Insurance Corp., which insures bank deposits, said it would not have to dip into the insurance fund as a result of the seizure.
The Seattle-based thrift has roughly $310 billion in assets and was searching for a lifeline after piling up billions of dollars in losses due to failed mortgages.
The transaction will give JPMorgan Chase its first commercial branch locations in Nevada and other Western states, giving it the opportunity to become a competitor for large consumer institutions, such as Bank of America, Wells Fargo Bank and U.S. Bank, a source told the Review-Journal.
Most of Washington Mutual’s customers are consumers, rather than businesses which these giant regional banks serve. By contrast, local independent banks serve mostly small businesses.
Washington Mutual has 36 branches in Las Vegas, North Las Vegas and Henderson. It is expected to have 90 days to decide which of those branches it may purchase.
JPMorgan Chase is acquiring all of the deposits, including amounts that exceed the $100,000 maximum typically insured by the Federal Deposit Insurance Corp. for each customer, the source said.
Washington Mutual’s bank charter technically is in Henderson, but its presence here has more legal importance than economic. The thrift is believed to enjoy tax benefits and corporate legal protection in Nevada, but its headquarters are in Seattle.
WaMu’s fate played out as Congress tried to reach an accord that will ease the global credit crunch, which has already driven Lehman Bros. Holdings Inc. and IndyMac Bancorp out of business, and Bear Stearns Cos. and Merrill Lynch & Co. into hastily arranged rescues. As many as five banks had considered bids for WaMu without making an offer, balking in part because the lender faced as much as $19 billion in mortgage loan losses.
Resolving WaMu’s situation “is a positive,” said Patrick Becker Jr., who oversees $2 billion as chief investment officer at Becker Capital Management in Portland, Ore. “That’s been a big cloud over the market and financial shares.”
His firm does not own JPMorgan or WaMu shares.
WaMu and JPMorgan officials didn’t return calls seeking comment.
Five banks that were considering bids, including JPMorgan Chase & Co., have failed to make an offer in the week since WaMu put itself up for sale. WaMu also approached Carlyle Group and Blackstone Group LP, two people briefed on the matter said.
With the acquisition, New York-based commercial bank JPMorgan will rival Bank of America as the nation’s largest commercial bank. The company currently ranks second with about $440 billion in deposits as of June.
The two companies are emerging as the winners in the current crisis. Funded by deposits, and less involved in the business of securitizing loans, they are strong at a moment of weakness for erstwhile rivals. JPMorgan already has carried off the remnants of investment bank Bear Stearns, which collapsed in March. Bank of America has picked up Countrywide Financial and Merrill Lynch.
WaMu came under increasing pressure to strike a deal as its stock sagged and ratings companies pummeled its debt. Standard & Poor’s on Wednesday cut WaMu’s rating for the second time in nine days, dropping it to CCC from BB-.
