April 7 (Bloomberg) -- Washington Mutual Inc., the largest U.S. savings and loan, rallied in German trading after the Wall Street Journal said the Seattle-based company may get $5 billion from an investment group led by private-equity firm TPG Inc.

Washington Mutual, which has lost 74 percent of market value in the past 12 months, gained 17 percent to $11.86 today. The bank is close to receiving funds from the TPG group to bolster the balance sheet after more than $3 billion of home-mortgage writedowns and loan losses, the Journal reported, citing unidentified sources.

At least 14 banks and securities firms have sought cash from outside investors in the past year after more than $230 billion of markdowns and losses caused by the collapse of the U.S. subprime mortgage market, data compiled by Bloomberg show. Washington Mutual Chief Executive Officer Kerry Killinger told shareholders in January that he expected a ``dramatic'' increase in loans that will need to be modified to avert defaults.

Washington Mutual reported its first loss since 1997 in the fourth quarter after writing down the value of its home-mortgage unit by $1.6 billion and setting aside $1.5 billion to cover bad loans. The lender also said in January that it will have to put aside $1.8 billion to $2 billion in provisions for the first quarter.

The company had its credit rating cut last month by Standard & Poor's to BBB from BBB+, two steps above junk, and S&P said another reduction was possible.

Mounting Losses

Losses from the subprime market have affected more than 40 companies, according to Bloomberg data. Zurich-based UBS AG, Switzerland's biggest bank by assets, announced plans last week to seek 15 billion Swiss francs ($14.8 billion) in a rights offer to replenish capital, while New York-based Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, raised $4 billion in a stock sale.

The investment group led by Fort Worth, Texas-based TPG would purchase both common and preferred shares in Washington Mutual, the Journal reported. TPG, co-founded by David Bonderman, also would probably get a seat on the company's board, the newspaper said.

Washington Mutual spokesman Derek Aney and TPG officials in Fort Worth and London weren't immediately available for comment. TPG, which acquired Dallas-based power producer TXU Corp. last year, is seeking more than $15 billion for a new fund, potential investors said in February.

Analysts are becoming more bearish about Washington Mutual's prospects because of higher credit costs. Frederick Cannon of Keefe Bruyette & Woods Inc. told clients last week he estimates the company will post a loss of $3.15 a share this year, compared with his earlier prediction of $1.45.

To contact the reporter on this story: Elizabeth Hester in New York at ehester@bloomberg.net.

Last Updated: April 7, 2008 06:35 EDT