Citigroup Brushed Off Bank of America Overture - WSJ

Includes: BAC, C
by: SA Eli Hoffmann

A prominent investment banker floated the idea of a Citigroup (NYSE:C)/Bank of America (NYSE:BAC) merger as Citi was dealing with huge mortgage-related writedowns and the loss of CEO Charles Prince earlier this month (full story), the Wall Street Journal reports, but the idea was dismissed by Citi's board "out of hand" and no further discussions ensued. Bank of America says it never authorized a formal discussion, although sources say it did approach Citigroup several months previously. Bank of America recently became the number-one U.S. bank by market cap, somewhat vindicating CEO Kenneth Lewis who has long complained the firm doesn't get enough respect from Wall Street. A Citigroup tie-up would make the group the "undisputed titan" of U.S. banking. However, a combined firm would have to divest most of Citi's 1,000 U.S. branches and $250 billion in deposits in order to keep it under the 10% of all U.S. bank deposits regulatory cap; Bank of America already holds 9%. One incentive for Citi, the Journal says, would be the filling of its leadership void with the well-regarded Lewis. On Tuesday, Citigroup announced it approved a $7.5 billion capital infusion from an investment arm of the Abu Dhabi government in exchange for a 4.9% stake in the bank (full story).

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