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WaMu Transforming Into Card-Bond Machine
Asset Backed Alert, Harrison Scott Publications Inc. (March 9, 2007)

Washington Mutual is planning a big increase in its annual credit-card securitization volume.

Recent talks with underwriters indicate the Seattle bank expects to sell some $9 billion of such bonds this year, in an effort to fund growth within its card-lending business. It issued $4.5 billion of card-backed securities in 2006.

Word of the heightened pace came last week as WaMu priced its first credit-card securitizations of 2007, a $1.1 billion senior class and $150 million of single-A-rated notes (see Initial Pricings on Page 10). Barclays Capital and Citigroup were the lead managers.

The pumped-up program reflects substantial growth within WaMu's card-lending business, which remained relatively small until the company purchased Providian Financial in October 2005. At the time, Providian held more than $18 billion of card accounts, a good chunk of which it had already securitized.

By yearend 2006, WaMu expanded the portfolio to $23.5 billion, thanks largely to a marketing effort aimed at customers of its growing retail-banking network. The bank also extended its scope beyond the subprime borrowers who were Providian's bread and butter to individuals with prime credit histories.

Those efforts translated into about 3 million new accounts last year, according to WaMu's fourth-quarter earnings report, and expectations are that the lender will ring up at least that many new customers in 2007.

On the securitization front, the resulting jump in activity would help offset a decline in WaMu's output of subprime-mortgage bonds, as its production of the underlying loans for those securities takes a dive as part of an industry-wide shakeup. In fact, the lender has sold just $2.5 billion of subprime-mortgage securities so far this year, down from $11.6 billion by this time in 2006.

Overall, WaMu's asset- and mortgage backed securities programs have accounted for $16 billion of new deals in 2007, down from $17.6 billion a year ago - with offerings backed by prime-quality mortgages helping to buoy its more recent totals despite the subprime lag.

The company's credit-card issues, meanwhile, are coming via its Washington Mutual Master Note Trust. That entity replaced the Providian Master Note Trust early last year, but not before the former Providian vehicle contributed $1.3 billion to WaMu's 2006 tally.

Leading the push is Anthony Vuoto, who WaMu appointed as president of its credit-card business last month. Vuoto had been Providian's chief financial officer since 2002, and joined WaMu as part of his former employer's takeover - as did Providian's entire securitization staff.

Vuoto now oversees all aspects of WaMu's credit-card business. He replaces outgoing president Joe Saunders, who left to take a job at Visa.

J.P. Morgan Chase is the leading issuer of credit-card bonds so far in 2007, with $5.8 billion of deals. Bank of America led the market for all of 2006, with $11.3 billion of issuance. Overall, card-securtitization activity in the U.S. has slowed slightly this year, with $16.1 billion of transactions placed as of this week, down from $17.9 billion at this time last year.



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