JP Morgan acquires Washington Mutual

JP Morgan has stepped in to acquire Washington Mutual for $1.9 billion, after the Seattle-based bank was closed by US regulators on Thursday evening.

The deal includes the assets and certain liabilities of Washington Mutual’s banking operations, creating the largest depository institution in the US with over $900 billion of customer deposits. Excluded from the deal are the senior unsecured debt, subordinated debt and preferred stock of Washington Mutual’s banks.

The $1.9 billion fee was paid to the Federal Deposit Insurance Corporation, appointed as receiver after Washington Mutual was closed by the Office of Thrift Supervision on Thursday evening.

JP Morgan says the acquisition will immediately be accretive to earnings, and will add more than 50 cents per share in 2009. It expects to make annual pre-tax cost savings of around $1.5 billion by 2010.

Following the acquisition, JP Morgan said it would mark down Washington Mutual’s loan portfolio by around $31 billion. The bank also announced an $8 billion capital raising.