Fitch cuts Wachovia, puts Citigroup on watch

The strategic benefits of Citigroup Inc.'s acquisition of Wachovia Corp.'s retail, corporate/investment and private banking operations are tempered by Citi's own escalating asset quality challenges, according to Fitch Ratings.

Fitch said it has placed Citi's AA- long-term issuer default rating on rating watch negative following the announced agreement.

Separately, Fitch noted that it has placed Wachovia Bank on rating watch evolving and downgraded Wachovia Corp.'s long-term issuer default rating to BB- from A+.

In exchange for all its bank operations, Wachovia Corp. will receive about $2.2 billion in Citigroup stock, the agency said, adding that there is a meaningful possibility that the earnings of the remaining businesses will be strong enough to service the preferred dividends.

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