JPMorgan snaps up WaMu for $1.9bn

JPMorgan Chase has bought US credit union Washington Mutual for $1.9bn.

The bank has already come to the rescue of one failed US firm in 2008. In March it saved investment giant Bear Stearns from going under when it agreed to purchase it for $1.2bn.

WaMu had put itself up for sale on September 18 on the back of losses of $6.3bn over the last three quarters.

But the deal between WaMu and JPMorgan Chase was actually made possible by the Federal Deposit Insurance Corporation after it seized the failing credit union’s assets and shut it down.

The FDIC then brokered the deal with JPMorgan Chase to sell off WaMu’s deposits and branches.

The FDIC was set up in 1933 in the wake of the Great Depression to restore confidence in the US’ banking system.

Sheila Bair, chairman of the FDIC, says: “”For all depositors and other customers of WaMu, this is simply a combination of two banks.”

“For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning.”

JPMorgan Chase says it will be marking down WaMu’s loan portfolio to the tune of $31bn.

This represents JPMorgan Chase’s estimate of remaining credit losses related to impaired loans.

It intends to raise additional capital in connection with this transaction to maintain the company’s strong capital position.

The merger will create the largest US depository institution, with over $900bn of customer deposits.

Jamie Dimon, chairman and CEO of JPMorgan Chase, says: “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.”

“We look forward to welcoming WaMu’s employees to JPMorgan Chase and working with them as we build a great company together.”