The full cost to JPMorgan of taking over Washington Mutual’s banking deposits and loan portfolio will be much higher than the initial $1.9bn, reports the WSJ, because it plans to write down about $31bn of the bad loans and raise $8bn in new capital. All WaMu depositors will have access to their cash, but shareholders and other debt holders will likely see little if any recovery. The deal will vault JPMorgan into first place in nationwide deposits and greatly expand its nationwide franchise. WaMu has suffered huge losses but still boasts a strong deposit base and a network of 2,200 branches that bigger banks would have paid dearly for when times were good. Just a few months ago, with the credit crisis in full bloom, J.P. Morgan offered to acquire WaMu but was spurned in favor of a $7 billion infusion led by the private-equity firm TPG, considered one of the savviest buyout firms. This is the second time that JPMorgan, the second-largest US bank, has been a buyer of last resort, after agreeing in March to  purchase Bear Stearns and getting a $29bn backstop from the federal government for the deal. In fact, notes Reuters, with the WaMu acquisition, JPM’s chief executive Jamie Dimon is starting to look a little more like this century’s incarnation of John Pierpont Morgan.

This entry was posted by Gwen Robinson on Friday, September 26th, 2008 at 5:39 and is filed under Capital markets, M&A, People. Tagged with jpmorgan, wamu. Edit this entry.