Washington Mutual Preps Itself for Sale

WaMu fired its longtime CEO Kerry Killinger last week, replacing him with Alan Fishman, who was seen as being brought in to sell the struggling thrift.

"WaMu's new leadership is probably much more receptive to a take-out offer from JPMorgan CEO Jamie Dimon," CreditSights analysts wrote in a note that explores a possible deal between JPMorgan and WaMu.

"We sense that fast moving market events of the past week are in a sense taking over," the CreditSights analysts write. "Those banks and brokers which are subjected to 'bear raids' can quickly see their range of strategic options narrow and may reconsider merger offers from stronger players, even if a similar deal was rejected only a few months ago."

"We would not be surprised to see WaMu get scooped up by JPMorgan," the note said. "We view Wachovia (WB) and National City (NCC) as the other banks which may be taken over."

Indeed, late Wednesday, the Times reported Wachovia had contacted Morgan Stanley (MS) about a possible deal.

Others say that if the economy remains in trouble for an extended period of time, WaMu is likely to have to raise additional capital.

"Underlying all of the issues that face Washington Mutual is the rising and unknown level of credit expenses," writes Fred Cannon, an analyst at Keefe, Bruyette & Woods in a note Monday. "The challenge that Washington Mutual faces as a seller is the extremely weak values of its current loan portfolio in the marketplace."

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