Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Quick Hits: Is WaMu Bailout Next?


Brief scrutiny of today's headlines.


The US government is attempting to organize a buyout of battered Washington Mutual (WM), the New York Post reports.

The sticking point: "No one knows what's in their books," the newspaper said, quoting an unnamed person.

Citing anonymous sources, the New York Post says federal regulators have had discussions with several banks, including Wells Fargo (WFC), JPMorgan Chase (JPM) and HSBC Holdings (HBC). However, the newspaper said that no discussions of a deal between the banks and Washington Mutual are underway.

Washington Mutual has lost about 80% of its value this year amid concerns about its loan practices and growing losses.

In the second quarter, Washington Mutual lost $3.33 billion, or $6.58 a share. The bank set aside about $8 billion to cover bad loans in its mortgage portfolio.

Washington Mutual said loans valued at $2.17 billion weren't being repaid in the second quarter. The bank's non-performing assets rose to 3.62% of total assets in the second quarter from 2.87% in the first quarter.

However, Standard & Poor's says the bank can meet its immediate obligations. Nevertheless, S&P cut WaMu's credit rating to "junk" status, or below investing grade.

Minyanville Staff Contribution:

Meanwhile, the issue for Washington Mutual remains this: will a buyer step up to prevent customers from withdrawing deposits?

According to Bloomberg, WM as of last week had $143 billion in retail deposits, a decline of 4.4% from the previous quarter. Merrill Lynch (MER), in a research report, termed the company's balance sheet "low-quality" and stressed that a buyer will need to emerge soon before regulatory action raises even more customer concern, creating even more retail deposit withdraws.

At what price could an offer take place? Given the deteriorating situation in credit markets, it is very unlikely an offer would come at a premium to the current valuation and may even be offered at a steep discount. The reality, however, is that the board should consider whatever offer comes their way, even if it does come at a discount. Every day without a decision thus far has brought another day of shrinking value.

Actionable ideas, instant analysis. Real-time from bell to bell.
Minyanville's Buzz & Banter - 14 day FREE trial

No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos