WAMU COURTING BUYERS
Washington Mutual continued discussions with several potential bidders yesterday as the nation’s largest savings and loan works to find a solution to a looming cash crunch, according to sources familiar with the matter.
WaMu held a meeting Sunday night to update its board of directors on the progress of the auction process, which is being run by Goldman Sachs, sources said. But the board did not vote on a transaction.
The Seattle-based thrift has received several “expressions of interest” from different parties including Citigroup, JPMorgan Chase, Wells Fargo, HSBC and Spain’s Banco Santander. Bloomberg News also reported that Canadian bank Toronto-Dominion Bank also recently joined the group of potential buyers.
Any deal could take a few more days to work out as both sides assess the impact of the Treasury Department’s $700 billion asset-purchase program, sources said.
But, several analysts believe the program is unlikely to have much impact on WaMu’s short-term financial health.
Moody’s Investors Service downgraded WaMu’s financial strength by one notch yesterday as well as its preferred stock rating.
“We believe WaMu’s capital is insufficient to absorb its mortgage losses,” said Craig Emrick, Moody’s Vice President and Senior Credit Officer.
WaMu shares dropped 21.7 percent yesterday to close at $3.33.
Potential buyers are interested in WaMu’s 2,300 branches and $143 billion in retail deposits, but are concerned about the $25 billion or so of potentially toxic mortgages the company has on its books.
Bidders are pushing federal regulators, who are loathe to seize the bank’s assets if it goes under, to take on some of the bad loans.
The introduction of the Treasury’s bailout program “could serve to slow the sale-process that it is exploring, partly because it will be in [WaMu’s] interest to consider the implications and partly because any possible buyer would likely want to consider its options under the program,” said Merrill Lynch analyst Kenneth Bruce.
The government, led by the Federal Deposit Insurance Corp., is said to be pushing WaMu to find a partner quickly in order to avoid taking on the bank’s retail assets should it become insolvent.
The feds are also concerned that further declines in WaMu’s stock price could prompt customers to begin pulling their funds, causing a run on the bank.
Sources said that WaMu has not lost a significant amount of deposits in the last week primarily because most of the company’s customers, who have an average of $5,200 each in their accounts, understand that their funds are federally insured.