Citi-chovia or WaCiti (C, WB)

The rumor mill and the deal-making mill might not be dead.  The New York Times’ DealBook noted that Citigroup Inc. (NYSE:C) and Wachovia Corporation (NYSE: WB) were in early merger talks.  Citi shares closed up 3.8% at $20.15 in a late-day run-up after being down sharply earlier.  Wachovia shares closed down 27% at $10.00 on fears that it would face credit troubles similar to WaMu.  These mergers have so far not been great for shareholders at competing banks. Wachovia’s stock is actually down about 3% in after-hours trading.  Where that ultimately goes is anyone’s guess. Until there is a confirmation from one or both companies, we are treating this more as rumor than as fact.

As we noted, Citigroup’s financial supermarket model is now being vindicated based upon the financial consolidation.  Too bad it executed that strategy poorly.

Jon C. Ogg
September 26, 2008