Private equity could save banks, ironic or iconic? (WM, WFC, NCC)

17 04 2008

Private equity could save banks, ironic or iconic? (WM, WFC, NCC)

Posted by: in Financials and Analyticals

Filed under: Financials and analyticals, Raising money, Texas Pacific Group, Investments, Value and lack thereof

There was an interesting report that surfaced over the weekend that took greater hold on Monday morning, yet nothing official has been released.

Washington Mutual (NYSE: WM) shares are rising sharply this day on “weekend talk” that they will be supported by an investment from private-equity group led by TPG Inc, also known as Texas Pacific Group. The company has been forced to write-down billions on home-mortgages and loan losses since the credit crisis, and WaMu is also one of the large quasi-money-center banks that is at-risk of being in jeopardy on its own. According to Reuters, it said “a source” says the deal could be announced as soon as this day

It could be a substantial investment of some $5 billion, although once you get into details the number mysteriously changes wildly among sources as far as terms and as far as dollars. Whatever it is, it’s working for the banking giant whose stock has been battered. Shares are up $2.70, over 26%, to $12.87 on the speculation. The 52-week range is $8.72 to $44.66.

What is perhaps more interesting than anything, is that this doesn’t necessarily include Wells Fargo (NYSE: WFC). That company has been listed as one of several companies in a position to be a savior for distressed financial companies. This would also lend credibility to a bank or private equity saving grace for National City Corp. (NYSE: NCC), which has also been in the soup.

If private equity ends up being a savior for the banks, even if it is an iconic trend it would be nothing short of ironic if you’ve been reading about all the private equity deals that have failed.