Wachovia sells out; FDIC backs expected losses

Sep 30, 2008 (The Decatur Daily - McClatchy-Tribune Information Services via COMTEX) -- WB | Quote | Chart | News | PowerRating -- The national banking crisis visited Decatur on Monday as ailing Wachovia Corp. sold its banking operations to Citigroup Inc.

Wachovia, which acquired SouthTrust in 2005, has two offices in Decatur and one in Hartselle.

Wachovia customers have full access to their funds and do not need to take any action as a result of the sale, said Birmingham-based spokeswoman Evelyn Mitchell.

She said customers would receive additional information on the impact of the sale in the next few days.

Local Wachovia officials referred all questions to Mitchell. Mitchell referred most questions to Wachovia's corporate headquarters, which did not return calls.

All deposits safe

All deposits in the bank are safe, officials said, backed by Citigroup and, up to $100,000, by the Federal Deposit Insurance Corp.

FDIC had aggressive involvement in the transaction, providing loss protection to Citigroup for $312 billion of Wachovia mortgages and other at-risk assets.

In 2006, Wachovia acquired Golden West Financial Corp. for $25 billion, inheriting its $122 billion portfolio of Pick-A-Pay-ment loans. The loans were Gol-den West's specialty and allowed borrowers to skip some payments. The company's main markets were in California and Florida, states hit hard by falling real estate prices.

Success predicted

In a May 2007 conference call, Wachovia's then-Chief Executive Officer Ken Thompson said, "I think that 12 months or so from now, people are going to look at the acquisition of Golden West as one that produced great success for Wachovia."

Wachovia's board ousted Thompson in June.

As of June 2007, Wachovia's Morgan County deposits totaled $116.8 million, about 8 percent of all Morgan County deposits, according to FDIC records.

Most of the deposits -- $62.6 million -- were in the Hartselle office.

"Wachovia branches are open. It's business as usual," said Mitchell. "There are no immediate changes for our customers. Their deposits continue to be fully insured under the FDIC coverage and also will be backed by Citigroup. We will be communicating with customers in partnership with Citigroup."

Wachovia employs 25 in Decatur and 11 in Hartselle.

"There are no immediate changes for employees at this time," Mitchell said.

Still publicly traded

Wachovia will remain a publicly traded company, retaining its asset management, retail brokerage and parts of its wealth management business.

It will retain investment company A.G. Edwards.

Trading was halted Monday, but in pre-market trading its shares dropped below $1. Its 52-week high, in October 2007, was $52.25. Shares closed at $10 Friday.

Citigroup is acquiring $700 billion in Wachovia assets, along with its liabilities. Wachovia has $53 billion in debt.

Citigroup will pay $2.16 billion for Wachovia's bank subsidiaries.

It agreed to assume responsibility for the first $30 billion losses on Wachovia loan portfolio, plus another $12 billion divided over three years. FDIC will provide loss protection on losses beyond that amount.

The boards of the two companies approved the transaction, which remains subject to shareholder approval.

Citigroup's assets

After the acquisition, Citigroup will have 9.8 percent of U.S. deposits and $1.3 trillion in deposits globally. It will be the largest U.S. bank in terms of deposits.

Citigroup had no offices in Alabama before the purchase. It has 200 million customer accounts and does business in 100 countries.

The holding company said Monday it would seek to raise $10 billion through sale of shares and would reduce its quarterly dividend to maintain its capital position.

Wachovia had its start in 1879 in Winston, N.C. Most of its growth was in the last two dec-ades. It has 120,000 employees and $448 billion in deposits.

To see more of The Decatur Daily, or to subscribe to the newspaper, go to http://www.decaturdaily.com Copyright (c) 2008, The Decatur Daily, Ala. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index