Skip to main content

Citi, Wells Fargo Extend Wachovia Truce

Citigroup and Wells Fargo agreed to extend a freeze to litigation through Friday morning as they work on a compromise over their competing bids for Wachovia.

Updated from Wednesday, Oct. 8


(C) - Get Free Report


Wells Fargo

(WFC) - Get Free Report



(WB) - Get Free Report

have agreed to extend the deadline freezing any litigation until Friday, as the companies continue to discuss an agreement regarding the fate of the Charlotte, N.C., bank.

The companies, after consultation with the

Federal Reserve

, said in a joint statement Wednesday that the extension for the litigation standstill will now expire at 8 a.m. on Friday, Oct. 10. The "standstill agreement" was set to expire at noon Wednesday.

The Wall Street Journal

reported Thursday that talks between Citigroup, Wells Fargo and the U.S. government over a way to divide Wachovia were hung up on several key issues.

Citigroup and Wells Fargo have been surprised by the concentration of assets they regard as low-quality, the


reports, citing people familiar with the matter. As a result, both banks are worried that buying even part of Wachovia could saddle them with steeper losses than previously expected.

Citigroup and Wells Fargo also have been fighting over the computer system used in Wachovia's 3,348 retail branches. Citigroup wants full control of Wachovia's system when the deal closes. Wells Fargo says the two banks should share it temporarily, according to the



Citi filed a $60 billion lawsuit on Monday against


and Wells Fargo for breaching an exclusivity agreement. Citi on Sept. 29 agreed to pay $2.16 billion for Wachovia's banking operations, in a government-assisted deal. Wells Fargo trumped that offer by reaching a $15.1 billion deal for all of Wachovia on Friday, prompting a flurry of legal activity over the weekend.

Wachovia would have failed on Sept. 30 if


hadn't heeded the federal government's call to purchase its banking operations the day before, Citi said Monday in announcing the lawsuit. The bank also claimed Wells Fargo "walked away" from a deal before federal authorities called on Citi to help.



reported Wednesday that Citi is reaching out to potential partners to join its bid for Wachovia as the companies discuss, along with the Federal Reserve, possibly splitting up Wachovia.

Citigroup was trying to line up other companies, including non-banks, to join its bid for Wachovia's branch network, the


reports. Citigroup's goal is to win a bigger share of Wachovia's deposits, but not to take over the entire company, a person close to the matter said, the



"There is still a relative sense of optimism that Wells Fargo is going to prevail -- whether that means the entire company or a significant portion of the company," says Todd Hagerman, an analyst at Credit Suisse. "

There continues to be speculation that Wachovia could be broken up as part of a settlement."

Hagerman says "anything can happen," but stressed Wachovia needs a quick resolution.

"I don't think the regulators can afford to let this thing linger for too long," he says.

Shares of Wells Fargo rose 4% on Wednesday, while Wachovia fell almost 4%. Citi closed 5% lower.