Toll rises: Another US bank ‘looking’ for buyers

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The current financial turbulence in the US took yet another toll with America’s sixth largest bank, Wachovia, starting preliminary talks with potential buyers including Citigroup, Wells Fargo and Spain’s Banco Santander. Also, Washington Mutual, the 119-year old banking institution, has on Friday filed for bankruptcy after sale of its banking unit to JPMorgan on Thursday.

Media reports in the US about Wachovia’s possible sell-off—a day after the collapse of Washington Mutual, the biggest bank failure of US history—has added fuel to the fire with US stocks dropping most in four months even as Congress debate over the $700 billion bailout package to save financial institution in the country.

Wachovia has assimilated distressed assets worth $122 billion on account of its exposure in the housing mortgage. The bank’s problems stem largely from its acquisition of mortgage lender Golden West Financial Corp in 2006 for roughly $25 billion at the height of the nation’s housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of pick-a-payment loans, Golden West’s specialty, which let borrowers skip some payments. Wachovia, according to its website, has assets of over $800 billion and its brokerage operations manage $1.1 trillion of client assets.

“Wachovia approached potential buyers, including Citigroup, Wells Fargo and Spain’s Banco Santander, on Friday after a 27% plunge in its shares deepened fears over the future of the sixth-largest US bank,” UK daily Financial Times reported.

After assessing the fallout situation of its shares, Wachovia executives led by its CEO Robert Steel contacted Citi, Wells and Santander, the report said.

Wachovia shares are down 74% this year. These three financial majors—Citi, Wells and Santander- were also interested to buy Washington Mutual Inc but ultimately JP Morgan acquired most of the WaMu.

However, US financial daily Wall Street Journal reported that, “Wachovia officials don’t believe they need to rush into a deal, and the bank isn’t feeling immediate pressure on its financial condition,” quoting people familiar with the company. Interestingly, analysts in the US say Wachovia Corp’s suitors may use a template honed by JPMorgan Chase & Co CEO Jamie Dimon last week—wait to see whether regulators will seize the bank, then buy the best assets and let the government sort out the rest.