Citi, Wells battle over Wachovia could end soon

NEW YORK/WASHINGTON (Reuters) - A top U.S. regulator forecast Wachovia Corp's fate would be settled by the end of Monday as Wells Fargo & Co and Citigroup battled over bids to acquire the struggling bank.

The increasingly bitter dispute has drawn in U.S. government officials in an attempt to broker a compromise and Sheila Bair, chairman of the Federal Deposit Insurance Corporation, said she expected a solution "that serves the public interest" to be reached on Monday.

Citigroup, which a week ago announced a preliminary agreement to buy Wachovia's banking assets for $2.2 billion, was considering an offer for the entire bank among other options to bolster its offer, a person close to Citi said.

But the person also said Citi has no appetite to buy Wachovia assets without some sort of government guarantee, unlike Wells Fargo, which made a $15 billion counter bid for the troubled bank on Friday.

Citi shares fell more than 11 percent on worries that it could lose the chance to increase its deposit base through a Wachovia takeover, while Wachovia was down about 5 percent at midday on concern about the impact of a protracted legal battle.

"A protracted legal squabble is in no one's interest," said Michael Farr, president of investment manager Farr, Miller & Washington, explaining that the uncertainty over Wachovia's future will likely cause depositors to withdraw their savings from the bank.

Wells Fargo stock tumbled some 6.3 percent, while the wider KBW Banks index was down 6 percent.

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.

(Writing by Elinor Comlay; Editing by Jeffrey Benkoe and Maureen Bavdek)

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