Citi aims for $3 billion in 'consolidation synergies' from Wachovia rescue

Citi aims for $3 billion in 'consolidation synergies' from Wachovia rescue

Citigroup is targeting $3 billion of consolidation synergies from its acquisition of debt-hit bank Wachovia under a loss-sharing deal brokered by the Federal Deposit Insurance Corporation (FDIC).

Citi will acquire all of the banking subsidiaries of Wachovia - including five depository institutions - for $2.16 billion and assume Wachovia senior and subordinated debt, totalling approximately $53 billion.

Citi says the agreement will greatly increase its retail branch network in the US and globally. Following completion of the transaction Citi will have around 4300 branches in the US and approximately another 3300 throughout the world. The group will also operate around 28,000 fee-free ATMs in the US.

Citi says as there is little overlap between the two footprints, it expects to close less than five per cent of the combined branches. Around 31% of Wachovia branches are located in existing Citi markets.

In addition, Citi will use Wachovia technology platform to expand its own online banking system, while Wachovia's cash management platform will be added to its international global transaction services business.

"Citi expects to realise more than $3 billion of annualised expense synergies through the consolidation of overlapping functions," says the US bank in a statement. "Following the closing of the transaction, Citi expects to complete the integration of the retail banking operations by year-end 2010."

News of Citi's acquisition of Wachovia comes on the same day that the UK government confirmed it was nationalising Bradford & Bingley (B&B) after agreeing a sale of the UK lender's deposit book and branch network to Spanish banking group Santander for £612 million.

B&B's retail deposits, branch network and its related employees will transfer to Abbey - Santander's UK subsidiary.

António Horta-Osório, chief executive of Abbey, says the transfer of deposits and B&B's network of 197 retail branches increases the scale of Abbey's operations in the UK to around 10% of the market.

"We will significantly increase the potential of our distribution capability through the additional branches and have brought a further 2.7 million customers to the bank," he says.

Abbey says the Bradford & Bingley brand will remain and customers will continue to use existing channels - branches, telephone and Internet - for transactions.

Santander is also in the process of acquiring the UK's Alliance and Leicester (A&L) under a deal agreed in July. The Spanish bank expects to save £180 million a year from cutting jobs and centralising IT systems at A&L as it moves UK bank's operations onto its own Microsoft-based Partenon banking platform.

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