Another day of speculation capped a shaky week for shares of Washington Mutual Inc., the nation's biggest savings and loan and now a magnet for takeover rumors.
Pressured by regulators, WaMu's board fired longtime Chief Executive Kerry Killinger on Monday. But its shares, which closed last week at $4.27, closed Friday at $2.73, down 36% for the week, in a further humiliation for what was a $45 stock early last year.
Rumors flew through the mortgage industry all week. One was that Seattle-based WaMu would cease all home lending next week. Another said Citigroup Inc. would step in to buy the thrift. And an industry publication reported Friday that JPMorgan Chase & Co. was in late-stage talks to buy WaMu.
JPMorgan, based in New York, has considered WaMu a tempting target because of its huge branch network in the West. Killinger had forged WaMu largely by acquiring California S&Ls -- American Savings, Great Western, Home Savings -- in the 1990s. Subprime credit-card specialist Providian was added in 2005.
Spokesmen for WaMu and JPMorgan declined to comment, but a person close to JPMorgan Chief Executive Jamie Dimon said Friday that no talks were underway.
Another report said WaMu, which has lost more than $6.3 billion over the last three quarters because of growing problems in its mortgage portfolio, might seek to sell some of its far-flung assets, such as branches in New York.
As the various scenarios battled for traction Friday, WaMu shares fluctuated wildly, rising as much as 16% above Thursday's closing price and falling as much as 14% below it.
One big fear is that the market uncertainty will take a toll on what is widely seen as an extraordinary asset -- WaMu's more than 2,600 offices in 36 states, most of them retail banking branches. The doomsday scenario: an IndyMac Bank-style panic by depositors, forcing regulators to step in.
WaMu addressed those fears Thursday in a statement emphasizing that it continued to meet regulatory net-worth requirements and was, in fact, considered well capitalized. But fears lingered.
"The biggest short-term problem WaMu is facing is the steady erosion of its deposit franchise and going-forward profitability due to all the bad news," said Bert Ely, a veteran banking consultant.
Though new CEO Allan H. Fishman has barely had time to warm his chair, "a deal sooner rather than later is better for its stockholders," Ely said. "If WaMu's problems are serious enough and the regulatory pressure is strong enough, WaMu's directors will cut a deal."
But the person close to JPMorgan's CEO said the big New York bank didn't have enough information about WaMu's banged-up mortgage and credit card holdings to make an informed offer.
"Just how toxic is toxic?" this person said. "You need more transparency to figure out exactly what's going on."
In early 2007 WaMu was the sixth-biggest subprime lender and fighting Countrywide Financial Corp. for the No. 1 spot in "alt A," the not-quite-ready-for-prime mortgages to borrowers who didn't have to document their earnings.
Now Countrywide has been swallowed by Bank of America Corp. and IndyMac is being run by Uncle Sam. But Killinger's big thrift is still alive, if not exactly kicking like it used to.
Money & Co.
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