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'Nutty Rumors' Warm Citigroup Shares

Will BofA buy Barclays? Will Citi split? Where's de Molina?

There must be a full moon out, because lunacy is running high in the banking sector.

First, Merrill Lynch analyst Edward Najarian put out a research note saying

Bank of America


was on the verge of buying



, Britian's third-largest bank. This despite the lack of any clear evidence that's the case.

Bank of America couldn't be reached for comment, but that didn't keep its shares from sliding $1, or 2%, to $51.43. Barclays surged $2, or nearly 4%, to $57.70.

Then speculation went swirling down Wall Street that banking behemoth



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was about to break itself up in a bid to boost its stock.

Of course, Citigroup CEO Chuck Prince repeatedly has denied any intention of breaking up the banking giant -- even though many market pundits have urged him to do so in a bid to boost the bank's ailing stock.

A Citigroup spokesman declined to comment. Even so, shares were up $1.37, or 2.7%, to $52.08.

Najarian sees BofA paying up to a 30% premium for Barclays -- a move that would create the world's largest bank with a market cap in excess of $330 billion.

Now, there may be a bit of logic to such a deal. BofA, the nation's second-largest bank in terms of assets, has said it wants to expand overseas, and regulatory deposit rules prohibit it from doing too many U.S. bank acquisitions.

But it's one thing to speculate about the merits of a deal. It's a quite another to issue a research report that all but says a deal is about to happen, which is pretty much what Najarian did.

"In our opinion, BAC's next big acquisition will likely be Barclays PLC, and a deal could be announced near term," writes Najarian.

Najarian also suggests that the surprise resignation of BofA CFO Al de Molina may be an indication a deal is in the works. He also notes that BofA CEO Ken Lewis canceled a recent meeting with institutional investors to make an "impromptu business trip."

Whatever you say, Inspector Clouseau.

Najarian's nattering aside, de Molina's resignation also plays into the Citi speculation. According to the latest rumors, de Molina is on his way to Citigroup to replace current CFO Sallie Krawcheck. With de Molina in tow, Citigroup would then proceed to start selling off some of its assets.

The talk was wild enough to get Dick Bove, an analyst at Punk Ziegel who has been known to make a few off-the-wall predictions himself, to issue a research note debunking the speculation.

Bove's headline says it all: "Nutty Rumors."