JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. may bid for parts of Washington Mutual Inc., the biggest US savings and loan, three people with knowledge of the discussions said. Buyers may be interested only in pieces of Seattle-based WaMu, said the people, who asked not to be identified because the talks are private. Wachovia, the fourth largest US bank, meanwhile was reaching out to Morgan Stanley to negotiate a merger, a person familiar with the companies said. Banks may have to merge to survive after the global credit crunch drove Lehman Brothers Holdings Inc. into bankruptcy, Merrill Lynch & Co. into a buyout by Bank of America and American International Group Inc. into a government takeover. Lenders, including San Francisco-based Wells Fargo, are scouting for assets to acquire at beaten-down prices now that stock-market declines have wiped out more than $1 trillion in market value from US companies. “If we could get some deals done, that will add some confidence to the market,'' said Jack Ablin, who helps manage about $55 billion as chief investment officer of Harris Private Bank in Chicago. “Banks are as cheap as they've been ever, relative to the rest of the market.'' Brad Russell, a spokesman for Washington Mutual, declined to comment on Wednesday, as did JPMorgan spokesman Joseph Evangelisti and Wells Fargo spokeswoman Julia Tunis Bernard. Officials at Citigroup and Bank of America in London also declined to comment. WaMu, whose market value has plummeted 85 percent this year on losses tied to subprime markets, is drawing interest because of its 2,300 branches and $143 billion in retail deposits, the people familiar with the matter said. Potential buyers wouldn't be willing to take on the company's mortgage-related investments, whose losses may total $19 billion over the next 2 1/2 years, according to WaMu's estimate. “Any of those deals potentially takes out a little bit of the fear and risk of the market,'' said Jaime Peters, an equity analyst at Morningstar Inc. in Chicago. “We have a lot of fear in the market that is causing stocks to trade beyond a fundamental basis and can hurt the financial system.'' WaMu took a step toward selling itself yesterday when its biggest shareholder, TPG Inc., agreed to waive a $1.5 billion payment it had negotiated if the lender is sold. WaMu accepted a $7 billion TPG infusion in April, after rebuffing a takeover offer by JPMorgan Chief Executive Officer Jamie Dimon. “Our goal is to maximize the bank's flexibility in this difficult market environment,'' Fort Worth, Texas-based TPG said in a statement. WaMu advanced to $2.30 in Frankfurt trading on Thursday, up 14 percent from its $2.01 close in New York composite trading yesterday. Its decline this year is the biggest in the 24-company KBW Bank Index. Morgan Stanley analyst Betsy Graseck wrote in a Sept. 14 report that JPMorgan would benefit from a presence in the West and Southeast, home to most of Washington Mutual's branches. “A potential acquisition of WM would be a strategic positive for JPM,'' wrote Graseck, who rates the shares “overweight.'' Washington Mutual is being advised by Morgan Stanley and Goldman Sachs Group Inc., a person familiar with the talks said. Goldman, which advised WaMu on the TPG investment, declined to comment through spokeswoman Andrea Rachman. JPMorgan's Evangelisti also declined to comment. Wells Fargo is looking for acquisitions at “reasonable'' prices, Chief Executive Officer John Stumpf said Sept. 10. The bank has said it favors smaller companies that carry less risk than big purchases.
