JPMorgan acquires WaMu

JPMorgan has stepped in to acquire Washington Mutual for $1.9 billion, after the Seattle-based bank was closed by US regulators in late September.

The deal includes the assets and certain liabilities of Washington Mutual's banking operations, creating the largest depository institution in the US with over $900 billion of customer deposits. Excluded from the deal are the senior unsecured debt, subordinated debt and preferred stock of Washington Mutual's banks.

The $1.9 billion fee was paid to the Federal Deposit Insurance Corporation, appointed as receiver after Washington Mutual was closed by the Office of Thrift Supervision on September 25.

JPMorgan said the acquisition would immediately add to earnings, and would add more than 50 cents per share in 2009. It expects to make annual pre-tax cost savings of around $1.5 billion by 2010.

Following the acquisition, JPMorgan said it would mark down Washington Mutual's loan portfolio by around $31 billion. The bank also announced an $8 billion capital raising.

"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," says Charlie Scharf, head of JPMorgan Chase's retail business. "Following a transition, Washington Mutual customers will be able to take advantage of Chase's broader network and a wider product range."

Chase expects to convert WaMu's consumer banking, home lending and credit card businesses to the Chase brand over the next two years.