NEW YORK (Reuters) - Wells Fargo & Co and Citigroup Inc , embroiled in a battle for Wachovia Corp , saw their shares fall on Monday as their dispute added to the woes of the sector.
A Citigroup official said Monday the company might consider a bid for the whole of Wachovia, according to CNBC, after Wells Fargo said Friday it would buy Wachovia in a deal worth close to $15 billion, topping Citi's earlier bid just for Wachovia's banking assets, which was backed by the U.S. government.
On Sunday, Citi said it won a court order blocking Wells Fargo from buying Wachovia. That was the first step in a weekend of legal wrangling in state and federal courts as Citi tried to protect its initial agreement.
People familiar with the matter said Sunday that the Federal Reserve was brokering discussions between Wells and Citi over which bank would buy Wachovia's assets.
The Wall Street Journal reported the Fed was pushing the two banks to compromise by potentially carving up Wachovia between them.
Citigroup stock slid 10 percent at $16.58, while Wells Fargo fell 3 percent to $33.51, both on the New York Stock Exchange. Shares in Wachovia Corp, which had climbed on the news of the Wells Fargo offer, dropped 5.8 percent to $5.85, also on the NYSE. The wider KBW Banks index <.BKX> was down 6.4 percent.
"The overriding consideration is to get something done and done imminently," said Michael Farr, president of investment manager Farr, Miller & Washington. "A protracted legal squabble is in no one's interest," he added, explaining that the uncertainty over Wachovia's future will likely cause depositors to withdraw their savings from the bank.
Citi said last Monday it would buy Wachovia's banking assets for $2.2 billion, sharing some of the risk in Wachovia's toxic mortgage portfolio with the U.S. government.
That deal did not include a signed merger agreement, but Wachovia did sign an agreement to negotiate only with Citigroup through Monday, October 6.
On Friday, Wells Fargo said it had signed an agreement to buy Wachovia in an all-stock deal that valued the bank's shares at $6.88, based on Friday's closing prices.
Both Citi and Wells Fargo would like to acquire the retail branches of Wachovia, which has been hobbled by the credit crisis.
Wells Fargo, the seventh-largest bank by assets, has managed to remain profitable during the credit crunch, while Citi is looking to turn around its ailing business after posting about $60 billion in write-downs and losses during the last year.
(Reporting by Elinor Comlay, editing by Maureen Bavdek/Jeffrey Benkoe)
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