JPMorgan bid $7 billion for Washington Mutual Inc WM.N, but the largest U.S. savings-and-loan agreed instead to an infusion of that size from private equity firm TPG Capital LP TPG.UL and other investors, a person briefed on the matter said.
A spurned bid for Washington Mutual may mean that the bank remains on the lookout for acquisition opportunities. Experts say JPMorgan Chief Executive Jamie Dimon, with a well-earned track record of fixing major banks, has room for more.
“They are unbelievably well-positioned,” said William Smith, chief executive of Smith Asset Management, which owns JPMorgan stock. “They have -- in Jamie Dimon’s own words -- a fortress-like balance sheet. They are not going to be foolish and they are going to make acquisitions that make sense.”
JPMorgan has been hurt less by credit market turmoil than many of its peers, although its $2.97 billion fourth-quarter profit was down 34 percent from a year earlier.
With stronger capital levels than several rivals, it also has not publicly sought infusions from outside investors, as have Citigroup Inc C.N, Merrill Lynch & Co MER.N and Morgan Stanley MS.N, or conducted big securities offerings.
Its stock is up about 1 percent this year, compared with a nearly 8 percent decline in the 24-member Philadelphia KBW Bank Index .BKX.
FLORIDA AND CALIFORNIA
Dimon, who ran Bank One Corp before selling it to JPMorgan for $56.9 billion in 2004, had largely been on the deal-making sidelines until saving Bear Stearns from a run on the investment bank and a likely collapse. The Federal Reserve and U.S. Treasury encouraged JPMorgan to do the Bear Stearns deal.
Dimon has said any purchase would have to make business sense, be executed well, and carry a “right and fair” price that likely doesn’t dilute earnings per share.
A spokesman for JPMorgan declined to comment for this article.
“Over time, they definitely want to build a broader retail banking franchise in the United States,” said Ricardo Kleinbaum, a credit analyst at BNP Paribas. “Plus, they want to position themselves to buy distressed assets in the marketplace.”
Analysts have said that JPMorgan could acquire a large U.S. retail bank. Dimon has said he would like to expand in Florida and California. WaMu has a strong presence in both.
“There are a number of fair-sized organizations in the Southeast that would give them some good coverage,” said Chip MacDonald, a partner at the law firm Jones Day whose practice emphasizes financial institutions and mergers and acquisitions. “Some of this might be a bet too on the comeback of the Florida market.”
Some experts said they were surprised to learn JPMorgan had looked at WaMu while it is preparing to integrate Bear Stearns, once the fifth-largest investment bank.
“Bear Stearns is a major acquisition,” said Jim Huguet, chief executive of investment adviser Great Companies. “And to do more than that, that would be a challenge for anybody.”
The acquisition is expected to close in June. Last week, JPMorgan announced its first personnel changes since agreeing to buy Bear, naming top-level managers for the combined investment banking and trading businesses.
“It’s a people business,” Huguet said. “And making sure that you keep the good people and that those people are happy, I think, is really the big challenge.”
MacDonald said Dimon could integrate the investment banks and at the same time acquire a commercial bank, as he could have different teams working on the transactions.
Any new acquisition would come with its headaches, such as integrating systems and people, but Dimon, known as a details man, is also known for his shrewd business judgment.
“He’s built the platforms and the systems and the people to do deals and to integrate acquisitions and to realize the synergies from them,” MacDonald said. “What I read from Jamie Dimon is that he is going to pick where he wants to be.”
Additional reporting by Christian Plumb; Editing by Brian Moss
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