Wachovia Corp., the sixth largest bank in the U.S. by assets – which operates a branch office less than a mile west of Sanatoga PA – announced this morning (Sept. 29, 2008) it would sell its banking operations to Citigroup Inc. and become the latest casualty of turmoil in the nation’s financial markets.
It was not immediately clear how the sale would affect Wachovia’s branch offices at either 1470 E. High St., closest to Sanatoga, or 401 E. High St., near downtown Pottstown. Information gleaned this morning (9:56 a.m.) from several different financial news reports indicates Citigroup – which operates Citibank – is likely to keep most Wachovia branches open and re-brand them as Citibank locations.
A report in BusinessWeek Online said the purchase by Citibank of Wachovia’s retail bank, corporate and investment bank, and wealth management operations was intended to give Citibank a wider base of consumer branch offices.
By buying Wachovia, Citigroup gets 4,365 U.S. branches and more than $600 billion of U.S. deposits, giving it a 9.8-percent share of the U.S. banking market. The deal makes Citi “an instant power in an area where it was undersized relative to rivals,” Reuters News Service reported this afternoon (4:32 p.m.)
The Citibank branch currently closest to Sanatoga is located 17 miles southeast, in Berwyn PA. However, Citi Financial Services, a subsidiary company, operates offices in Pottstown at 1432 E. High St. and 204 Shoemaker Rd. Citibank also operates automated teller machines at 7-Eleven convenience stores in Pottstown and Stowe.
The Wachovia-Citibank deal was facilitated by the Federal Deposit Insurance Corp. (FDIC), BusinessWeek reported. The FDIC “asserted that Wachovia didn’t fail … that all depositors are protected, and there will be no cost to the Deposit Insurance Fund,” BusinessWeek said. Wachovia’s announcement added that “customers of both companies should continue banking as usual, and feel confident that their deposits are secure. Also, employees and vendors should continue to operate business as usual.”
Reuters estimated that as recently as February 2007, when its stock was as high as $58.80, Wachovia had a market value of more than $112 billion. Wachovia’s sale today for $2.16 billion values the North Carolina-based lender at just 2 percent of its former worth, or roughly $1 per share.
Under the deal, according to Reuters, New York-based Citigroup will absorb up to $42 billion of losses on Wachovia’s $312 billion loan portfolio. The FDIC will take on any further losses in exchange for $12 billion of Citi preferred stock and warrants.
The name “Wachovia” will not disappear from financial news pages, however. It will remain in business with an asset management unit, called Evergreen, and its Wachovia Securities brokerage, which includes the former A.G. Edwards Inc.
Editor’s note: This article has been updated since its initial publication.