Citigroup Inc. will acquire the banking operations of Wachovia Corp, the troubled Charlotte, N.C.-based bank, reports Marketwatch, quoting the press release from the Federal Deposit Insurance Corp. Citi will acquire “the bulk of Wachovia’s assets and liabilities,” the FDIC statement said.
Under the agreement, Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans, while the FDIC will take losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing the risk, according to the press release. Wachovia shares were down more than 80% in premarket trading Monday morning.
This deal further concentrates power within the US banking industry in the hands of a few leaders like Bank of America, JPMorgan Chase and Citigroup who would control more than 30 percent of the industry’s deposits. Making certain value picks amidst this carnage, these banks have consolidated their position to an extent that they have an unrivalled power to set prices for their loans and services.
Wachovia has been operating in India for 12 years. The acquisition of the correspondent banking business of Union Bank of California in 2005, further enhanced Wachovia’s presence in India.
The bank opened two new offices in 2006, and operates through its offices in Chennai, New Delhi and Mumbai.