Wachovia customers will become part of the nation's largest bank under a $2.16 billion deal announced yesterday in which Citigroup Inc. will acquire Wachovia's banking operations.
Customers of Wachovia, which is the Baltimore area's third-largest bank with about 9 percent of the market in terms of deposits, shouldn't expect changes until the end of the year, when the deal is expected to close.
Even then, terms on outstanding loans, certificates of deposit and mortgages will remain the same. And Citi officials said they expect to close few bank branches because the two institutions have little overlap.
Thirteen banks have failed this year, although federal regulators made a point yesterday to say the Wachovia deal is an acquisition, not a failure.
In the deal orchestrated by the Federal Deposit Insurance Corp., Citigroup agreed to absorb as much as $42 billion in losses from Wachovia's $312 billion loan portfolio. The FDIC will cover losses above that level. Citigroup is giving the agency $12 billion in preferred shares and warrants to partially compensate it for taking on the risk.
The sale of Wachovia's banking subsidiaries will leave the nation with only three superbanks: Citi, Bank of America and JPMorgan Chase. Less competition generally means higher fees and less favorable terms on loans and other products.
But some banking experts say budget-conscious consumers these days are more inclined to shop around for mortgages and other products and more likely to spread their business over more than one institution.
One of those is Martin Hunter, an accountant for Constellation Energy Group, who headed to the St. Paul Street branch of Wachovia in Baltimore yesterday to withdraw some money from checking and savings accounts. He planned to split the cash between two new accounts at Chase and Bank of America.
Hunter said he started making plans to do so when he heard talk of a Wachovia takeover Friday. He had not changed his mind yesterday, although he felt more reassured when he heard that Citi would step in, "But in the current climate ... you can't have all your eggs in one basket."
North Carolina-based Wachovia Corp. won't disappear but will remain a public company with two major subsidiaries, brokerage Wachovia Securities and Evergreen Asset Management.
With this deal, Citi will have more than $600 billion in U.S. deposits, just under 10 percent of the nation's market share. Worldwide, Citi's deposits will total $1.3 trillion, or $350 billion more than its biggest U.S. competitor, the company said.
What can Marylander Wachovia customers expect?
If you are a Wachovia credit-card customer, your account number and customer service numbers will remain the same and you should continue making your payments to the same address, Citi said. You will be notified if changes are to be made after the deal closes.
Citi also will honor the terms of Wachovia loans, mortgages and certificates of deposit, says Citi spokesman Rob Julavits.
However, Wachovia has been offering high-rate CDs to attract deposits, and customers with those CDs shouldn't count on Citi offering similar rates once the CDs mature, says Greg McBride, senior financial analyst with Bankrate.com.
After the deal closes, Citi will have about 4,300 branches in 22 states and the District of Columbia. Julavits doesn't expect many branch closings.
"The branch footprint of both banks complement each other. There is very little overlap. We see very limited consolidation," Julavits says.
If you are a bank customer of both Wachovia and Citi, your federal deposit insurance coverage will remain the same for six months after the deal closes or until your CD matures. After that, you may have to make adjustments: say, open up an account at a new bank, to make sure your deposits are fully insured.
Inga Smith, a 31-year-old bus operator for MTA who has checking and savings accounts with Wachovia, has been through two changes in ownership, from Signet to First Union to Wachovia.
She said she reluctantly has had to adjust to changes by each new owner, such as new minimum requirements for savings accounts. With Citigroup taking over, she's bracing for more to change. Still, she feels a loyalty to her bank.
"I don't want to go to another bank," she said. "I don't need to be changing anything."
The Associated Press contributed to this article.
WACHOVIA AND CITIGROUP IN MD.
Employees: 1,770 in Md., at branches throughout state; 1,230 in Baltimore area
Branches: 80 in Md.; 55 in Baltimore area
Employees: 6,000 in Md., at CitiFinancial, a credit card processing center in Hagerstown; and at Smith Barney brokerages; 1,000 in Baltimore, at CitiFinancial North America
Branches: 17 in Md.; two in Baltimore