Dear Colleagues,

Today, Citi took another bold step to expand our capabilities to serve clients in the U.S. and strengthen our overall capital and liquidity positions. We reached an historic agreement-in-principle to acquire the banking operations of Wachovia Corporation (NYSE: WB) for approximately $2.16 billion in stock.

Included in the transaction are all of Wachovia bank branches and deposits, the corporate and investment bank, and private bank. Wachovia's retail brokerage and asset management business are not part of the transaction.

The addition of Wachovia immediately establishes Citi as a leading U.S. retail bank, with deposits totaling $600 billion and a U.S. deposit market share of 9.8%.  After closing, our total deposit base of $1.3 trillion will exceed that of our nearest U.S. competitor by $350 billion.

Wachovia's very attractive retail bank footprint is highly complementary with that of Citi, with just 31% of Wachovia branches located in existing Citi markets and a strong, attractive customer base. In fact, the transaction propels Citi to a top three ranking in seven metropolitan statistical areas (MSAs): New York, Miami, Atlanta, Washington D.C., Las Vegas, Charlotte, and San Francisco.  When the transaction closes at the end of December, Citi will have about 4,300 branches and 28,000 fee-free ATMs in the U.S. 

The transaction also brings a strong, highly complementary U.S. cash management platform to Citi's leading Global Transaction Services business; a strong U.S. mid-market corporate banking franchise; and a small yet successful and competitively significant U.S. private bank that Citi intends to integrate into its existing Global Wealth Management business.

The acquisition of Wachovia is consistent with our ongoing efforts to "get fit" as an organization by greatly enhancing our U.S. banking capabilities and adding a team of exceptional managers and employees to our ranks. Our press release provides additional details about the overall transaction and I encourage you to read it  ( See: Citi and Wachovia Reach Agreement-in-Principle for Citi to Acquire Wachovia's Banking Operations in An FDIC-Assisted TransactionCiti and Wachovia Reach Agreement-in-Principle for Citi to Acquire Wachovia's Banking Operations in An FDIC-Assisted Transaction). 

Specifically, I want to highlight that this transaction provides Citi with important downside loss protection through the FDIC from Wachovia's loan portfolio and caps credit losses well below Wachovia's earnings power. In addition, we look to achieve substantial expense savings and ongoing efficiencies for Citi through integration and building on Wachovia's best-in-class retail technology platform. 

To maintain our strong capital position, we will be raising additional capital and our Board has decided to reduce the quarterly dividend to a level more in line with our leading competitors. These are prudent steps given the ongoing volatility in the markets and the challenging economic environment around the globe.   

As I said before, the unprecedented changes in the financial services industry provide unique opportunities for strong companies such as Citi. Today's agreement will transform our U.S. banking operations and we look forward to integrating these two leading banking franchises to better serve clients. 

Vikram

See: Citi to acquire Wachovia assets in a US government-backed rescue