NEW YORK: With its 1.9 billion dollar buyout of 119-year old Washington Mutual, financial services major JPMorgan Chase has bailed out two beleaguered US institutions within a short span of seven months.
JPMorgan agreed to purchase Washington Mutual's banking assets to create the largest depository institution in US with over USD 900 billion of customer deposits, it said in a statement. The buyout follows Federal regulator's closing the latter's operations which is touted as the biggest banking failure in the American history.
Earlier in March, JPMorgan Chase had agreed to buy beleaguered investment bank Bear Stearns and had paid USD 2.3 billion. Together the financial services giant has shelled out just 4.2 billion dollars to acquire Bear Stearns and WaMu.
However, the transaction excludes senior unsecured debt, subordinated debt and preferred stock of WaMu banks, the statement added.
The acquisition of WaMu, which has an asset base of USD 307 million, would create the second-largest branch network for JPMorgan Chase with locations reaching 42 per cent of US population.
In conjunction, with this acquisition JPMorgan Chase will be marking down the acquired loan portfolio by about USD 31 billion which primarily represents our estimate of remaining credit losses related to the entire losses, JPMorgan said in a statement.
It intends to raise additional capital in connection with this transaction to maintain the company's strong capital position.
JPMorgan had purchased Bear Stearns in a deal for a mere two dollars a share which was about one-tenth of its price in a stock-for-stock exchange.
"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.
"As we have said in the past, 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," JPMorgan Chairman and CEO Jamie Dimon said.
JPMorgan Chase is strongly committed to both a strong banking system and our responsibility as a good corporate citizen. "We are active in the states and local communities where we do business," Dimon added.
The financial services major expects to convert WaMu's consumer banking, home lending and credit card businesses to the Chase brand and technology platforms over the next two years. JPMorgan Chase and Washington Mutual customers should
be able to access the combined network of 14,000 ATMs without fees in the coming months, the statement said.
Besides, JPMorgan Chase's head of retail business Charlie Scharf said, "This acquisition makes us more convenient and valuable to our customers and meets our strategic goal of broadening our footprint to serve our current and future customers better.
Following a transition, Washington Mutual's customers will be able to take advantage of Chase's broader network and a wider product range - all backed by the strength and security of JPMorgan Chase, Scharf added.
