Citigroup buys Wachovia at Wallstrip: Finance Web Show and Podcast with Julie Alexandria

Citigroup has agreed to buy Wachovia Bank’s banking operations. The FDIC was quick to point out that Wachovia did not fail. Wachovia merely had 312 billion dollars in bad loans that threatened the stability of the bank, so the FDIC stepped in and helped orchestrate the buyout deal with Citigroup.

With the purchase, Citigroup will become the nation’s 3rd largest bank. All for the bargain price of 1 dollar a share. You can’t beat that. Citigroup will absorb 42 billion dollars in loses, but the FDIC will cover everything beyond that amount.

But is this a good move for Citigroup? The bank has recorded losses for the last 3 quarters, totaling more than 17 billion dollars. But if the bailout bill goes through, things will be looking up for Citigroup.

Here’s more, from AP:

With the acquisition of Wachovia, Citigroup has reclaimed its title as the biggest U.S. bank by total assets. Including Wachovia, the bank now has assets of $2.91 trillion, as of June 30. That could change, however, as Citigroup shrinks its balance sheet, a decision Chief Executive Vikram Pandit made in May to rid the bank’s books of risky debt. [...]
Just a short time ago, Citigroup was under the scrutiny of investors who worried about the possibility of its collapse given its massive exposure to mortgage-backed securities. The New York-based bank has not turned a profit for three straight quarters, and lost a total of $17.4 billion during that period after writing down its assets by about $46 billion. That’s the most write-downs of any U.S. bank.
But the government’s proposed $700 billion bailout plan could prove to be the deal’s silver lining.
While the plan broadly aims to prevent banks from profiting on the sale of troubled assets to the government, there is an exception made for assets acquired in a merger or buyout, or from companies that have filed for bankruptcy.
This detail could allow Citigroup to sell toxic mortgages and other assets it gained from Wachovia for a higher price than the bank actually paid for them.

Read the full story here.