Citigroup takes over Wachovia banking

Citigroup takes over Wachovia banking

In a deal designed to protect depositors, the Federal Deposit Insurance Corp. has facilitated an agreement to have Citigroup Inc. acquire Wachovia Corp banking operations. Wachovia is the second largest bank in Florida with more than 60 branches after combining operations with SouthTrust Bank several years ago.

As details of its takeover unfolded, Wachovia shares plunged 91 percent to 94 cents. The stock had closed Friday at $10, down 74 percent for the year.

Citigroup will absorb up to $42 billion of losses from Wachovia’s $312 billion loan portfolio, with the FDIC covering any remaining losses. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.

The deal greatly expands Citigroup's retail outlets and puts it among the U.S. banking industry's Big Three, along with Bank of America Corp. and J.P. Morgan Chase & Co. With the acquisition of Wachovia, Citigroup now has assets of $2.91 trillion, as of June 30.

The FDIC asserts that Wachovia did not fail, and that all depositors are protected and there will be no cost to the Deposit Insurance Fund.