Magazine article American Banker

Wamu Seen as Likely to Buy PNC Mortgage

Magazine article American Banker

Wamu Seen as Likely to Buy PNC Mortgage

Article excerpt

Washington Mutual Inc. has emerged as a likely buyer for PNC Financial Services' mortgage unit, industry sources said. PNC announced it was considering the mortgage unit sale on July 18.

The Seattle thrift company and the Pittsburgh banking company declined to comment. But investment bankers and servicing advisers said it would make sense for Wamu to buy Vernon Hills, Ill.-based PNC Mortgage. (At the same time, National Mortgage News reported earlier this week that a deal was done.)

PNC wants a buyer that would not break up its mortgage unit, sources said. There is little geographic overlap between Wamu's mortgage operation, which is heavily concentrated on the West Coast, and PNC's, which is spread more evenly around the country.

About one-quarter of the $85 billion of mortgages that the PNC unit services are secured by homes in California. That means it has regular contact with hundreds of thousands of potential banking customers for Wamu.

The two companies' businesses are by and large complementary in other ways, too. Wamu is a big originator of adjustable-rate loans, which it holds in its $110 billion mortgage portfolio, the third-largest after Fannie Mae's and Freddie Mac's. PNC Mortgage focuses on making fixed-rate conventional loans, which it sells.

Market sources said PNC's adviser, Salomon Smith Barney, is asking for a rich premium to pay for strategic value that exceeds the sum of the company's parts.

PNC's last 10-Q filing with the Securities and Exchange Commission indicated that as of June 30, the fair market value of its servicing asset was $2. …

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