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JPMorgan Chase buys Washington Mutual for $1.9 bn

Source: PTI
September 26, 2008 13:11 IST
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JPMorgan Chase has acquired all deposits, assets and certain liabilities of leading savings and loan association Washington Mutual's banking operations from the Federal Deposit Insurance Corporation for about $ 1.9 billion.

"This deal makes excellent strategic sense for our company and our shareholders. Our people have worked hard to build a strong franchise and balance sheet -- making this compelling transaction possible," JPMorgan Chase Chairman and CEO Jamie Dimon said.

The acquisition would create largest US depository institution with over $900 billion of customer deposits, financial services firm, a JPMorgan statement said.

However, the transaction excludes senior unsecured debt, subordinated debt and preferred stock of Washington Mutual's banks, it added.

Besides, JPMorgan would not be acquiring any assets or liabilities of the banks' parent holding company or the holding company's non-bank subsidiaries.

The acquisition would create the second-largest branch network -- with locations reaching 42 per cent of US population and would expand the consumer branch network of Chase into the states of California, Florida and Washington, while the acquisition would extend Chase's retail branch network to additional states of Georgia, Idaho, Nevada and Oregon.

"... increasing our regional banking presence not only strengthens our retail business, but also benefits other business lines across our firm, including our commercial banking, business banking, credit card, and asset management groups," Dimon added. 

The combined 5,400 branches in 23 states will also serve as a base to extend the reach of the business banking, commercial banking, credit card, consumer lending and wealth management businesses, the statement said.

The bank plans to complete most systems integrations and re-branding by year-end 2010, closing less than 10 per cent of branches in the combined network in overlapping markets.

"We look forward to welcoming Washington Mutual's employees to JPMorgan Chase and working with them as we build a great company together," Dimon said.

The acquisition of Washington Mutual's banking operations is expected to be immediately accretive to earnings and would add more than 50 cents per share in 2009.

Incorporated in 1889, Washington Mutual, was seen as heavily exposed to the mortgage crisis and witnessed over 85 per cent drop in its share price this year.

Customers of both companies may continue banking as usual, JPMorgan said, adding that employees and vendors should continue to operate business as usual.

In conjunction with this acquisition, JPMorgan Chase would be marking down the acquired loan portfolio by around $31 billion.

JPMorgan Chase intends to raise additional capital in connection with this transaction to maintain the company's strong capital position, the statement added.

Earlier this year, the banking giant also took over Bear Stearns, one of the most high-profile victims of the US
sub-prime property crisis.

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