In the largest banking failure in US history, it was announced late last night by the U.S. Federal Deposit Insurance Corporation (FDIC) that JPMorgan Chase (JPM) had acquired the banking operations of Washington Mutual Bank following their seizure by the FDIC. The previous largest bank failure was that of Continental Illinois in 1984, with roughly $40bn in assets. Washington Mutual dwarfs that failure, with north of $300bn at the time of seizure.
The FDIC said that it facilitated the acquisition in order to fully protect all depositors without cost to the Depositors Insurance Fund. "For all depositors and other customers of Washington Mutual Bank, this is simp
ly a combination of two banks," said FDIC Chairman Sheila C. Bair. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."
The deal has cost JPM $1.9bn, but costs associated with bad debt on WaMu's books is likely to drive the real cost of the deal much higher. JPM says it will write down $31bn in bad debt in WaMu's loan portfolio, and also plans to raise $8bn in additional capital via the sale of common stock. The bank estimates its Tier 1 Capital ration will fall from 9.2% at 30 June to 8.3% at 30 September due to the deal. JPMorgan Chase gains a much coveted western network of bank branches from the deal, and will have combined deposits of $911bn and 5,410 branches when the deal closes. This makes JP Morgan the second largest in the US by number of branches, behind only Bank of America, and the number one bank in terms of deposits, up from number two and number three, respectively.
AIG Life to Close Enhanced Fund
AIG Life UK has announced today that they will close their £5.7bn enhanced fund on 15 December. Withdrawals from the fund have been suspended for the last 10 days. AIG note that policyholders who wish to liquidate their investment can transfer 50% of their holdings to into the standard fund – they can then request to withdraw their money from here. The remaining 50% will remain locked in the enhanced offering before being transferred into the standard fund on 15th December, by which time AIG hope to have sold off assets to fund the redemptions. Policyholders who wish to remain invested will be transferred into a newly created protected recovery fund. AIG Life guarantees that investors who move their money here will at least receive the value of their investment at December 15 back in three years and a half years time, which strikes us as a poor deal by any measure.
All ETF Securities ETCs Back Up and Running
In last week's Fund Times: 15 – 19 September we noted that the London Stock Exchange (LSE) had halted electronic trading of 113 Exchange Traded Commodities that were backed by AIG. ETF Securities, the manager of the instruments, noted on Monday that all ETCs backed by AIG had now resumed trading on the LSE. Concerns were initially raised over AIGs abilities to act as guarantor on the products. However, ETF Securities note that AIG continues to honour all of its obligations under their agreements with them, including processing all creations and redemptions in the usual manner and paying all redemptions due on time.
Close Hire Unicorn UK Smaller Companies Manager
Close Investments have this week announced the appointment of Sam Barton from Unicorn Asset Management. Barton joins the smaller companies team at Close where he will be working with existing managers Deryck Noble-Nesbitt and Stephen Wood, who were themselves brought in . They will be responsible for managing around £100million assets under management including the CITS (Close Inheritance Tax Service), the Close Special Situations Fund, Close Beacon Investment Fund and specialist AIM and smaller companies mandates for private clients and institutions. During his time at Unicorn Barton managed smaller company funds for more than 6 years and had been part of the team managing the Unicorn UK Smaller Companies Fund since June 2007. In that period, the fund lost 32.1%, a slightly larger loss than the average fund in the Morningstar UK Small Cap Equity category.
F&C Adds to its Multi-Manager Team
F&C Investments this week announced that it has recruited Oliver Sonnbichler as a fund manager in its multi-manager team. This brings the team size up to four after Dean Cheeseman took over as Head of Retail Multi-Management from Richard Phillbin in April, and Paul Carne moved over from Crosby Partners as a fund manager in June. Sonnbichler was Head of Equity Fund Research at UBS Private Bank until 1994 when he joined Morgan Stanley Private Bank International as Head of the Third-Party Funds platform, a position he held until 2007. He joins F&C from the financial services practice at Navigant Consulting where he has undertaken projects for investment management and manager selection businesses.
Baillie Gifford Announce Fund Management Changes
Baillie Gifford announced this week that with effect from 29 September 2008, they will be making a number of changes to their investment staff. The Baillie Gifford British 350 Fund will now be solely managed by Iain McCombie. McCombie has jointly run the Fund with Charles Plowden, since September 2002, and has 14 years experience with Baillie Gifford. As a result, Plowden, the company's joint senior partner, will move to head up a new Global Alpha team.
Secondly Patrick Edwardson will lead a new team called Diversified Growth to manage Diversified Growth and Equity Income products. This will be supported with one further investment manager and one analyst. Finally Gerald Smith, currently Head of the Emerging Markets Team, will be promoted to the new post of Deputy CIO of the firm, commencing at the start of 2009. Following Smith’s promotion, Richard Sneller will succeed him as head of Baillie Gifford’s Emerging Markets team. Sneller is also a partner in the firm, with 14 years experience at Baillie Gifford.
Resolution Appoints Deputy Head of UK Equities
Resolution Asset Management this week appointed Neil Richardson to the newly-created position of Deputy Head of UK Equities. Richardson will report to Peter Reid, Director and CIO UK Equities after joining from Citigroup where he was a Director of Citigroup Global Markets, Pan European Equity Sales. Prior to this he spent nine years at Threadneedle, latterly as Head of Pan-European Research.
