Citi Buys Wachovia Banking Operations

"I said in the past that high losses in our cards portfolio should be expected for the remainder of this year and well into 2009 as unemployment and housing trends both continue to deteriorate," he said.

Citi is acquiring more than $700 billion in assets. It will be responsible for the first $30 billion of losses on Wachovia's loan portfolio and will record them under purchase accounting when the deal closes, expected to be completed by the end of the year. The company will then be responsible for the next $12 billion of losses up to a maximum of $4 billion a year over the next three years.

Additionally, through the acquisition of Wachovia's deposits, Citi will have more than $600 billion deposits in the U.S. -- a 9.8% market share -- and more than $1.3 trillion globally. After the deal is completed, Citi will own about 7,600 branches, 4,300 of which will be in the U.S.

Citi plans to fold its U.S. retail bank -- about one-third of the size -- into the Wachovia platform, Pandit said.

"During recent weeks, the financial landscape has changed significantly and presented us with unprecedented challenges," Steel said in separate release. "Today's announcement is the best alternative for the company, enabling a resolution on the Golden West portfolio."

Wachovia will continue to own its parts of its wealth management business, retail brokerage subsidiary AG Edwards and asset manager Evergreen Investments. Citi will headquarter the retail bank in Charlotte, N.C. and the investment bank in New York.