Washington Mutual Gains on Possible Capital Infusion

By , Money Morning •

By Jennifer Yousfi
Managing Editor

Shares Washington Mutual Inc. (WM) surged almost 30% yesterday (Monday) on news that the mortgage lender is close to a deal with private equity firm TPG Inc. that would boost its balance sheet by $5 billion.

Seattle-based WaMu, as the thrift is often called, is the latest financial firm to seek an outside capital infusion due to heavy subprime-related losses. For the fourth quarter, the firm took its first loss in 10 years with $3 billion of write-downs due to mortgage and loan losses.  

Story continues below...

WaMu is the sixth largest U.S. bank, based on bank deposit assets, with a 3.2% share behind Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), Wachovia Corp. (WB), Wells Fargo & Co. (WFC) and Citigroup Inc. (C), Chief Executive Officer Kerry Killinger said in a Jan. 29 investor conference. WaMu had $194.3 billion in deposits as of Dec. 31, Bloomberg News reported.

Arnold Danielson, chairman of Vienna, Virginia-based Danielson Capital, an adviser for financial services companies, told Bloomberg that the possible investment suggests TPG’s David Bonderman views the slide in financial stocks may be nearing an end.

"They apparently view this as a way to invest in WaMu with the idea of looking for a good flip within two or three years," Danielson said. "WaMu is essentially a savings institution that has been trying to play with Bank of America and Wells Fargo and they can’t keep up."

Unidentified sources close to the matter told The Wall Street Journal that the U.S. government was not involved in negotiating the deal, as it was with The Bear Stearns Cos. Inc. (BSC) bailout.

Shares of WaMu gained $2.98, a 29.3% increase, to close at $13.15.

News and Related Story Links: