Assuming the bank pays no more than a 5% premium, the acquisition would add 10% to its 2014 projected earnings per share and involve a modest hit to its Basel III Capital ratio and its tangible book value. Citi will still be able to achieve its target 9.5% Basel III ratio by the end of 2013. Also, some of the impact on capital could be offset by the potential release of unutilized deferred tax assets -- assets that can be used to offset a future tax expense provided there is an at least 50% probability that the company will have a positive income in the next accounting period. Citigroup had $42 billion in total DTA as of the first quarter. As the acquisition would add to its U.S. earnings and tax liability, Citi would be allowed to use some of the DTA, which will also release some capital.
Wells Fargo could be a close contender in the bidding process, according to the report. Though the deal makes less strategic sense for the bank, Wells has previously expressed interest in partner cards and the "deal economics is solid" according to Penala. JPMorgan Chase is, however, likely "too distracted to bid," given that it remains "laser-focused" on meeting capital and liquidity compliance this year. USBancorp and TD Bank are likely to be more interested in parts of the portfolio than the whole, according to the analyst. -- Written by Shanthi Bharatwaj in New York. >Contact by Email. Follow @shavenk