In this case Citi will increase its market share of 9

In the incredibly moving landscape of the American banking sector, the rankings do not take more than 24 hours. Friday, JPMorgan Chase had become the first Bank of deposits in the United States ($911 billion) after the resumption of Washington Mutual. As early as Monday, is Citigroup was the leadership by acquiring for 2.2 billion, Wachovia operations and 53 billion of debts, bringing the total of its deposits to 1.251 billion. Bank of America is third in distance with 785 billion in deposits. "There will more be two kinds of banks: those which survive and gaining share of markets and those who will be acquired and sacrificed", stated yesterday Matt McCormick, analyst at Bahl Gaynor in an interview with Reuters news agency. In this case, Citi will increase its market share of 9.8.

The buyout of Wachovia has been intensively negotiated these days first with Morgan Stanley, and then with Wells Fargo, Santander and Citi. As in the case of Washington Mutual, it was orchestrated by the Federal Deposit Insurance Agency, the agency that provides deposits of individuals. But Monday morning, it stressed that it was not a bankruptcy. It is expected that Citi absorbs up to 42 billion of losses on the 312 billion of loans to problems of Wachovia until the FDIC takes the relay, in exchange for 12 billion of preferred shares and warrants. Citi will raise $ 10 billion to deal with new obligations and plans to reduce its dividend in half. Wachovia will retain its brokerage for individuals and Evergreen its wealth management business.

Risk content

"It is a historical transaction whose risk is contained," assured Vikram Pandit, Citigroup's CEO yesterday. With more than 50 billion of write-downs of assets registered since the beginning of the "subprime" crisis and many raised capital, the Bank appeared to be entrenched in its own restructuring and less agile than its competitors to seize the opportunities. "With this acquisition, we will give depth to our activity of retail in the United States, with more than $ 600 billion of deposits on the territory and 1,300 billion in the world." "Now, 71 of our assets will be funded by our deposits, our long-term debt and our capital", Vikram Pandit assured. The operation must be accretive in two years and the risk is limited to an immediate loss of 30 billion dollars and 12 billion over three years, not exceeding 4 billion per year. According to the CEO of Citi, "the other risk is that of integration." It increased its fleet to 4.365 agencies in the United States and 3,300 outside the territory and do not reduce this number by more than 5.

Wachovia is part of his misfortune to redeem unfortunate Golden West Financial, a provider of loans real estate California, to 24 billion in 2006. The Bank has already registered 9.7 billion of losses in the first half. The loss of confidence in America's fourth Bank in terms of assets has worsened after the resumption of Washington Mutual by JPMorgan Chase. Suspected, like Washington Mutual, an accelerated withdrawal of deposits which would have forced to find a solution as soon as this weekend.