Update: Citigroup takes over failing Wachovia

Citigroup today assumed the assets of failing Wachovia Bank, marking the latest failure among financial institutions with bad mortgage loans.

Reports The Associated Press:

Citigroup agreed Monday to purchase Wachovia's banking operations for $2.1 billion in a deal arranged by federal regulators, making the Charlotte-based bank the latest casualty of the widening global financial crisis.

The deal greatly expands Citigroup's retail franchise — giving it a total of more than 4,300 U.S. branches and $600 billion in deposits — and secures its place among the U.S. banking industry's Big Three, along with Bank of America Corp. and JPMorgan Chase & Co.

But it comes at a cost: Citigroup Inc. said it will slash its quarterly dividend in half to 16 cents. It also will dilute existing shareholders by selling $10 billion in common stock to shore up its capital position.

In addition to assuming $53 billion worth of debt, Citigroup will absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio, with the Federal Deposit Insurance Corp. agreeing to cover any remaining losses. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.

Citigroup today assumed the assets of failing Wachovia Bank, marking the latest failure among financial institutions with bad mortgage loans.

Reports The Associated Press:

Citigroup agreed Monday to purchase Wachovia’s banking operations for $2.1 billion in a deal arranged by federal regulators, making the Charlotte-based bank the latest casualty of the widening global financial crisis.

The deal greatly expands Citigroup’s retail franchise — giving it a total of more than 4,300 U.S. branches and $600 billion in deposits — and secures its place among the U.S. banking industry’s Big Three, along with Bank of America Corp. and JPMorgan Chase & Co.

But it comes at a cost: Citigroup Inc. said it will slash its quarterly dividend in half to 16 cents. It also will dilute existing shareholders by selling $10 billion in common stock to shore up its capital position.

In addition to assuming $53 billion worth of debt, Citigroup will absorb up to $42 billion of losses from Wachovia’s $312 billion loan portfolio, with the Federal Deposit Insurance Corp. agreeing to cover any remaining losses. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.

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