NEW YORK—Charlotte-based Wachovia Corp. is currently in talks with several large banks about a takeover bid, according to several reports.
Wachovia shares declined 27 percent last Friday, as continued worries over the banking sector and an analyst’s concerns over Wachovia’s capital adequacy outweighed optimism of a federal bailout plan.
Deutsche Bank analyst Mike Mayo said in a research note, “We feel it is likely that Wachovia will need to issue equity to provide greater reassurance about its liquidity and solvency.” The comment, along with Washington Mutual’s failure, sent Wachovia’s stock plummeting.
Earlier this month Wachovia was engaged in talks with Morgan Stanley about a possible merger, but Morgan’s conversion into a commercial bank and Mitsubishi UFJ’s capital infusion have put the talks on hold.
Wachovia executives denied rumors of a liquidity crunch earlier this month. The bank gained a large portfolio of adjustable-rate mortgages after its acquisition of Golden West Financial, which the bank may be able to move off its balance sheet when the federal government approves its bailout plan.
“In an ideal world, Wachovia CEO Bob Steel would love keep the good stuff and hope the bill bails out the bad stuff,” New York Times DealBook editor Andrews Ross Sorkin said on Friday’s “Fast Money.”
A Goldman Sachs analyst believes that potential bidders may play the waiting game, the strategy JPMorgan Chase used before it acquired Washington Mutual (WaMu) for $1.9 billion, a fraction of WaMu’s previous value. The offer came after the U.S. government took over WaMu’s assets last week.
WaMu was the largest bank failure in U.S. history.
With WaMu and its $188 billion in customer deposits in the fold, JPMorgan became the biggest U.S. bank by deposits.
Potential bidders may gain Wachovia’s assets for far cheaper if the bank descends under the federal threshold for proper capitalization. Even with its stock at $10.00 after Friday’s close, Wachovia’s market capitalization stands at a hefty $21.6 billion.