Jilted Citigroup on the prowl to acquire a regional bank

The Wall Street Journal reported that Citigroup is looking to acquire a regional bank that overlaps the geography of its retail operations, less than a month after it walked away from Wachovia.

A Citigroup representative declined to comment.

In an effort aided by the Federal Deposit Insurance Corp., Citigroup tried to acquire Wachovia before Wells Fargo & Co. made a larger offer that did not rely on help from the government. After various lawsuits were filed over who was the rightful purchaser of Wachovia, Citigroup withdrew its bid. Wells Fargo is proceeding with its bid — valued at US$12.7 billion in stock — and expects the acquisition of the Charlotte, North Carolina-based bank to close by the end of the year.

Many analysts have expected Citigroup to strike again, and the bank has said it would likely use a US$25 billion investment from the government — part of the US$700 billion financial rescue package passed by Congress last month — to take advantage of opportunities in the market.

But the company’s third-quarter results heightened concerns that Citi — hampered by the relentless downturn in housing and turmoil in the financial markets — may not be in the best position to make an acquisition.

Of the four major U.S. banks — Citigroup, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo — Citi has been on the shakiest footing, reporting losses in the past four consecutive quarters while its rivals have managed to post profits, albeit dampened ones. Analysts polled by Thomson Reuters, on average, expect the New York-based bank to record quarterly losses through the first quarter of next year.

Last month, Citigroup said it lost US$2.8 billion, or 60 cents per share, during the third quarter. The deficit for the July-to-September period brings Citi’s total losses over the past 12 months to US$20.2 billion.

The bank has written down the value of investments tied to souring mortgages and other bad debt by some US$51 billion since the end of the third quarter last year — the most of any other bank.

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