Citi Buys Wachovia Banking Operations

Pandit went on to say that he has known Wachovia's CEO Robert Steel for nearly 20 years.

"By the time Bob [Steel] and I started to talk, we at Citi had the opportunity to look at a number of deals," Pandit said. "We passed on these because they were not compelling. This one is compelling."

Pandit added that the deal "will augment our access to stable funding and liquidity and will accelerate our efforts to establish Citi as the world's leading global financial institution."

At the same time, Citi said that as a result of the extreme volatility and continued deterioration in consumer credit, third-quarter net income is expected to decline vs. the second quarter, but improve from the first quarter, according to earnings guidance issued by CFO Gary Crittenden on the conference call.

Citi, which will report quarterly results on Oct. 16, expects to take writedowns on its subprime, leveraged loan, monoline and structured investment vehicle exposure totaling $4.2 billion. It also expects to see securitization losses in its cards business of $2 billion, Crittenden said.

Citi had previously announced a charge of $500 million related to a settlement on auction-rate securities and its exposure to Fannie Mae (FNM Quote) and Freddie Mac (FRE Quote) preferred and convertible shares of $450 million.

The company's total credit costs for the quarter are expected to be in the range of $9 billion to $10 billion, up from roughly $7 billion last quarter. Crittenden said approximately half of the increase is due to loan loss reserve building, primarily in relation to its credit card and mortgage businesses, while the remaining half is due to higher net charge offs than the company expected.