Business as usual at Wachovia?
NORWICH – Chaos on Wall Street hit a little closer to home Monday when it was announced that Citigroup Inc. would purchase Wachovia in a deal brokered by the Federal Deposit Insurance Corporation (FDIC). This buy-out will not affect clients of the Norwich Investment Group of Wachovia Securities, assured local Wachovia representative Dominic Shea.
“We are fully operational and equipped to conduct business in the usual way,” reported Shea, a financial consultant.
For the sum of $2.1 billion, Citigroup will be acquiring Wachovia’s general banking subsidiary which consists of 3,300 branches in 21 states. It will also be assuming $312 billion of bad debt in the form of toxic, high-risk loans.
The terms of a loss-sharing agreement between Citigroup and the FDIC will limit Citigroup absorbed losses on the arrangement to $42 billion. The FDIC will bear the risk for the remainder.
Wachovia’s brokerage and asset management arms were not included in the multi-billion dollar deal. Wachovia Securities, AG Edwards and Evergreen Investments will continue to operate as before, said Shea, although a plan to spin them off as a separate entity as early as December is in the works.
“We have a profitable, growing business,” said Shea. According to the financial consultant, the divestiture of Wachovia’s banking subsidiary will have “no implication” on the way the brokerage is run.
“During recent weeks, the financial landscape has changed significantly and presented us with unprecedented challenges,” said Robert K. Steel, CEO and president of Wachovia in a press release on Monday. “Today’s announcement is the best alternative for the company.”
The FDIC has made a point of stressing that, unlike WaMu, Wachovia did not fail, but rather will be acquired on an “open bank basis” by Citigroup with the regulator’s assistance.
“For Wachovia customers, today’s action will ensure seamless continuity of service from their bank and full protection for all of their deposits,” said FDIC Chairman Sheila C. Bair in a statement to the press. “There will be no interruption in services and bank customers should expect business as usual.”
Citigroup’s acquisition of Wachovia comes less than a week after Washington Mutual became the biggest bank to fail in U.S. history and just two weeks after Lehman Brothers filed for bankruptcy.
Wachovia’s share price dropped from $10 per share at close of business on Friday to under $1 in early trading on Monday before rebounding slightly to close at $1.84.
“We are fully operational and equipped to conduct business in the usual way,” reported Shea, a financial consultant.
For the sum of $2.1 billion, Citigroup will be acquiring Wachovia’s general banking subsidiary which consists of 3,300 branches in 21 states. It will also be assuming $312 billion of bad debt in the form of toxic, high-risk loans.
The terms of a loss-sharing agreement between Citigroup and the FDIC will limit Citigroup absorbed losses on the arrangement to $42 billion. The FDIC will bear the risk for the remainder.
Wachovia’s brokerage and asset management arms were not included in the multi-billion dollar deal. Wachovia Securities, AG Edwards and Evergreen Investments will continue to operate as before, said Shea, although a plan to spin them off as a separate entity as early as December is in the works.
“We have a profitable, growing business,” said Shea. According to the financial consultant, the divestiture of Wachovia’s banking subsidiary will have “no implication” on the way the brokerage is run.
“During recent weeks, the financial landscape has changed significantly and presented us with unprecedented challenges,” said Robert K. Steel, CEO and president of Wachovia in a press release on Monday. “Today’s announcement is the best alternative for the company.”
The FDIC has made a point of stressing that, unlike WaMu, Wachovia did not fail, but rather will be acquired on an “open bank basis” by Citigroup with the regulator’s assistance.
“For Wachovia customers, today’s action will ensure seamless continuity of service from their bank and full protection for all of their deposits,” said FDIC Chairman Sheila C. Bair in a statement to the press. “There will be no interruption in services and bank customers should expect business as usual.”
Citigroup’s acquisition of Wachovia comes less than a week after Washington Mutual became the biggest bank to fail in U.S. history and just two weeks after Lehman Brothers filed for bankruptcy.
Wachovia’s share price dropped from $10 per share at close of business on Friday to under $1 in early trading on Monday before rebounding slightly to close at $1.84.
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