NOW WAMU HAS BREATHING ROOM
Washington Mutual’s decision to provide an early look at its third-quarter earnings seems to have instilled some confidence that the nation’s largest savings and loan can survive on its own – at least in the short term.
The “update just released should calm some of the hysteria surrounding the stock and the company’s future,” said Fox-Pitt Kelton analyst Howard Shapiro.
“The update provided reassuring trend data on credit, deposits, liquidity and non-interest income.”
Also helping WaMu yesterday was an upgrade from Goldman Sachs, which took the thrift off its “Americas Sell” list and said even though losses “continue to deliver body blows to the bank, the equity base is absorbing the pain.”
Shares fell 3.5 percent yesterday to close at $2.73.
WaMu’s new CEO Alan Fishman also yesterday brought in Frank Baier, a former aide from his days at Brooklyn-based Independence Community Bankcorp, to be his special adviser as he takes a new look at WaMu’s business.
Shares of WaMu were up over 7 percent in early trading based on a report that JPMorgan Chase was in active negotiations to take over the embattled bank.
But sources close to WaMu said that, while Fishman is open to an offer at the right price, the bank is not in discussions with JPMorgan.
In April, private-equity giant TPG led a group of investors that pumped $7 billion into WaMu. TPG invested a total of about $1.5 billion into the company at an average price of $8 a share, according to a letter to the firm’s investors obtained by The Post.
Those investors are unlikely to take a loss and want JPMorgan or any other buyer to pay at least $8 a share before they accept a deal, sources said.
One of the reasons TPG made the investment in WaMu is because its “strong brand and positioning in high-growth markets make it an attractive target for larger banks that may seek to consolidate in a more normalized market environment,” according to a presentation given to TPG investors.
In April, JPMorgan was said to have offered around $5 a share for WaMu, which then-CEO Kerry Killinger rejected.
A key point that WaMu made in its release on Thursday night was that its giant base of deposits had not changed since the end of 2007, meaning people with checking accounts have not panicked and begun withdrawing their cash.
“Main Street appears to be less worried than Wall Street, as indicated by the deposit data,” said Shapiro of Fox-Pitt.
Still, some analysts believe WaMu could have problems stopping a run on the bank that would force it to raise capital.
“The biggest risk for [WaMu] is a run on deposits,” Stifel Nicolaus analyst Chris Brendler wrote in a report. “With all the recent headlines and recent IndyMac failure, WM’s retail deposit franchise is a huge concern to us as a significant outflow of consumer deposits could lead to devastating liquidity problems since the company has apparently already lost access to the capital markets.”