Wachovia Fight Ends With the Right Winner

A Wells Fargo and Wachovia merger makes a lot of sense for the two companies, said Bart Narter, the senior vice president of Celent's banking group, at the time of the announcement.

"Wachovia and Wells Fargo are nearly perfect complements to one another, with strengths on both the East and West Coasts, respectively," Narter says. "Wachovia's recent acquisition of Golden West gives it an overlapping branch footprint in California and both also have major activities in Texas. Other than these two very competitive markets, the two banks are the yin and yang of retail branch banking."

On the other hand, a Citi and Wachovia combination would have given the New York-based financial titan the kick-start its struggling domestic retail franchise needed to be competitive against other large players, including Bank of America (BAC Quote), JPMorgan Chase (JPM Quote) and Wells Fargo, as well as a significant addition to its deposit base -- something that banks these days are coveting as they struggle to fund their businesses in a deteriorating economic environment.

Wells Fargo, according to presentation materials last week, will now become the nation's largest bank, with 6,675 locations, $1.4 trillion in assets and close to $800 billion in deposits, surpassing JPMorgan Chase, even with the addition of Washington Mutual, which it took over last month.

Citi had planned to fold its U.S. retail bank into the Wachovia platform. The takeover also would have provided some much-needed stable funding and liquidity through Wachovia's deposit base. Citi had said that it would have had more than $600 billion in deposits just in the U.S. and more than $1.3 trillion globally.

Following Citi's decision to stand aside, Moody's said the company will remain on review for a possible downgrade.