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Rating Action:

MOODY'S CONFIRMS RATINGS OF WASHINGTON MUTUAL, INC. (SENIOR AT A3) AND ITS THRIFT SUBSIDIARIES (DEPOSITS AT A2) FOLLOWING ACQUSITION OF H.F. AHMANSON & COMPANY

02 Oct 1998
MOODY'S CONFIRMS RATINGS OF WASHINGTON MUTUAL, INC. (SENIOR AT A3) AND ITS THRIFT SUBSIDIARIES (DEPOSITS AT A2) FOLLOWING ACQUSITION OF H.F. AHMANSON & COMPANY Moody's Investors Service today confirmed the ratings of Washington Mutual, Inc. (Senior at A3) following the completion of Washington Mutual's acquisition of H.F. Ahmanson & Company. The long-term ratings of both companies had been placed on review for possible upgrade in March 1998 after the companies announced a merger agreement. Moody's also today raised the ratings of Ahmanson to equal those of Washington Mutual, Inc. (Senior from Baa1 to A3) and confirmed the ratings of Washington Mutual's and Ahmanson's thrift subsidiaries: Washington Mutual Bank, Washington Mutual Bank FA, Washington Mutual Bank FSB, and Home Savings of America FSB (Deposits for each at A2).

Moody's said the ratings confirmations reflect the enhanced strength of Washington Mutual's core franchises following the merger but also the challenges the company continues to face due to its limited diversification, heavy dependence on highly competitive and commoditized business lines, and its appetite for interest rate risk.

The rating agency noted the combined company has a strong residential mortgage loan business and a large consumer deposit franchise concentrated primarily along the west coast of the United States. However, Moody's stated, Washington Mutual continues to rely upon the highly competitive and commoditized residential mortgage lending business for most of its earnings, and depends heavily upon time deposits for funding. As such it lacks both the diversification of earnings sources and the wider interest margins typical of a commercial bank. Additionally, Moody's noted, the company's management is willing to take on greater interest rate risk than most banks and many of its larger thrift peers. The rating agency said that while Washington Mutual has had some success in diversifying its loan portfolio and its deposit base, most notably in its home territory of the pacific northwest, efforts by the combined company to offer more bank-like products without incurring undue risks will continue to present significant challenges for management.

Moody's noted that the challenge of integrating two sizable stand-alone institutions is considerable, particularly following so quickly behind Washington Mutual's acquisitions of American Savings Bank in December 1996 and Great Western Bank in July 1997, two other large California thrifts. However, the transaction has been conservatively structured, and the combination offers substantial opportunities for cost savings and earnings enhancement.

As a part of the transaction H.F. Ahmanson & Company was merged into Washington Mutual, Inc. As a result, Ahmanson's debt has been directly assumed by Washington Mutual, Inc. The upgrade of Ahmanson's debt ratings to equal the debt ratings of Washington Mutual, Inc. reflect this. Additionally, on October 3, 1998 Home Savings of America, FSB will be merged into Washington Mutual Bank, F.A. The ratings of Washington Mutual Inc.'s finance company subsidiary, Aristar, Inc., are unaffected by today's ratings actions.

The following ratings were raised:

H.F. Ahmanson & Company -- the senior debt rating from Baa1 to A3; the subordinated debt rating from Baa2 to Baa1; the junior subordinated debt rating from Baa3 to Baa1; and the cumulative preferred stock rating from "baa2" to "a3."

Ahmanson Capital Trust I - the preferred stock rating from "baa2" to "a3."

The following ratings were confirmed:

Washington Mutual, Inc. -- the senior debt rating at A3; the junior subordinated debt rating at Baa1; and the noncumulative preferred stock rating at "baa1."

New American Capital, Inc. -- the senior debt rating at A3; the subordinated debt rating at Baa1; and the cumulative preferred stock rating at "a3."

Great Western Financial Trust I and II -- the preferred stock rating at "a3."

Washington Mutual Capital I - the preferred stock rating at "a3."

Washington Mutual Bank -- the ratings of the thrift for long-term deposits and other senior obligations at A2; the ratings of the thrift for short-term deposits and other senior obligations at Prime-1; and the issuer rating at A2.

Washington Mutual Bank FA -- the ratings of the thrift for long-term deposits and other senior obligations at A2; the ratings of the thrift for short-term deposits and other senior obligations at Prime-1; the issuer rating at A2, and the subordinated debt rating at A3.

Washington Mutual Bank FSB-- the ratings of the thrift for long-term deposits and other senior obligations at A2; the ratings of the thrift for short-term deposits and other senior obligations at Prime-1; and the issuer rating at A2.

Home Savings of America FSB -- the senior debt rating at A2; the ratings of the thrift for long-term deposits and other senior obligations at A2; the ratings of the thrift for short-term deposits and other senior obligations at Prime-1; the issuer rating at A2, and the subordinated debt rating at A3.

Washington Mutual, Inc., headquartered in Seattle, Washington, is the largest thrift organization in the United States. Following the acquisition of H.F. Ahmanson & Company, the combined organization has roughly $156 billion in assets and $8.7 billion in equity, making it the ninth largest among all bank and thrift organizations in the United States.

No Related Data.
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