Wells Fargo - Citigroup chapter closes

Wells Fargo to pay Citi $100 million over Wachovia


Wells Fargo & Co will pay Citigroup Inc $100 million to settle multiple lawsuits over the contentious 2008 purchase of Wachovia Corp, closing another chapter in the receding financial crisis.

The banks said the settlement will resolve all claims related to the dispute.

Citigroup had originally sought as much as $60 billion of damages from Wells Fargo for derailing its September 2008 agreement to buy large portions of Wachovia and quadruple its U.S. branch presence.

"This could have dragged on forever, and sometimes I think you're better just settling and moving on," said Anton Schutz, president of Mendon Capital Advisors in Rochester, New York, which owns shares of both banks.

"If Citigroup had gotten Wachovia, the financial returns would have been significant," said Schutz. "But it might have made it harder for Citi to do some of the things they're doing now, like getting leaner." He said the $100 million amount seemed low relative to the stakes in the dispute.

Citigroup had initially agreed to buy much of Charlotte, North Carolina-based Wachovia for $2.16 billion.

Wachovia was struggling with soaring losses on mortgage loans, and the agreement with New York-based Citigroup called for Federal Deposit Insurance Corp to share in those losses.

Wells Fargo, based in San Francisco, then bid a much larger sum for all of Wachovia, in a takeover that did not require FDIC support.

The $12.5 billion merger closed at the end of 2008, roughly doubling Wells Fargo's size and giving it the largest U.S. retail branch banking network.

Comment: See previous post from July 2009: Citigroup claim denied

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