The week opens with Wachovia a bit closer to a deal. There were a few suitors for Wachovia which is troubled by a $110b option ARM loan portfolio, including Citigroup, but Wells Fargo has emerged as the primary acquirer going into Monday. The price is unknown at this time, but it won’t look like the bargain $1.9b JP Morgan Chase paid for WAMU’s deposits and branches on Friday. Wachovia does have a significant financial advisory and securities operation that helps their value. Nevertheless, the option ARM portfolio is not to be underestimated on its ability to wreak havoc on a firm’s financial position.
Morgan Stanley, fresh off its announcement last week to convert from pure investment bank to commercial bank (Goldman Sachs did the same), is now in advanced talks to have Mitsubishi Financial buy a 20% stake for $8b to $9b. Earlier this year, Mitsubishi did the biggest bank deal of the year (at the time) by buying the third of Union Bank of California it didn’t already own in a deal valued at about $3.5b and giving UBOC a value of about $10b.
When the Morgan commercial bank deal was first announced, we were intrigued because they would tend to understand the jumbo lending marketplace perhaps better than some of the massive players because they cater to a higher end client. So this Mitsubishi deal certainly supports that since Union Bank is also a big player in the jumbo marketplace, and are one of a few players. So perhaps Morgan can now get some of that market as well. Their (potential) new partner would certainly know how to show them the way.