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One of the ideas that has emerged during the legal fight over Wachovia Corp. is one that would divide the company between its would-be suitors, Citigroup Inc. and Wells Fargo & Co.
But aiming for that outcome implies that the strengths that attracted the two companies to Wachovia in the first place would still be available if it were cut into parts. And many observers say that assumption is hard to support.
"You'll have a tremendous amount of employee and customer dissatisfaction" if Wachovia is divided, said Nancy Bush, the president of NAB Research LLC.
On Monday the three companies agreed to suspend all litigation until Wednesday and to "cooperate in good faith" to resolve Wachovia's fate.
An idea said to have been advanced by the Federal Reserve Board over the weekend would seek to split Wachovia's 3,348 branches and $400 billion of deposits geographically, with Citi getting those in the Northeast and Wells getting those in the West and the Southeast.
Analysts said doing so would destroy the very retail banking culture that attracted both bidders in the first place — a culture that has helped Wachovia rank No. 1 in customer satisfaction surveys conducted by the University of Michigan for the last six years.
That culture is something Robert K. Steel, Wachovia's president and chief executive, touted heavily twice last week, first when the Citi deal to acquire his company's banking operation was announced, and later when Wachovia turned around and signed a deal to sell the whole company to Wells.
On a Friday conference call announcing the Wells deal, Mr. Steel discussed the "No. 1 sales and service" culture that would emerge. Selling to Wells "should allow us a great an opportunity to leverage our premier coast-to-coast banking presence," he said.
He had similarly touted Wachovia's "best-in-class" customer service in a press release for the Citi deal, just four days earlier.
On Monday, Wachovia said Mr. Steel was unavailable for interviews. A spokeswoman for the company said it believes the agreement with Wells is "proper and valid" and is in "the best interests of shareholders, employees, creditors, and retirees." She also referred to a comment Friday by Wachovia, where it said remaining "intact" was an important component of the Wells bid.
A call to the Fed was not returned.
Before Monday afternoon's standstill agreement, Citi had continued its legal and public relations blitz earlier in the day, including the announcement that the New York company had filed a complaint against Wachovia and Wells in the New York Supreme Court seeking $60 billion of damages.
And CNBC, citing a senior Citi official, reported Monday that the company might consider a bid for all of Wachovia, which would seem to underscore the idea that an intact Wachovia would be better than its parts. Citi did not return calls Monday.
Were regulators to divide the banking operations between Wells and Citi, each would fall short of its goal of having a nationwide banking operation capable of competing with Bank of America Corp. and JPMorgan Chase & Co. Were Wells to win, it would have a network of 6,675 branches, while Citi would have 4,300.
Though how the Fed would divide the branches is unclear, analysts said neither Citi nor Wells would be close to their desired branch levels if Wachovia were divided. Closures in certain markets would further lessen the attractiveness of such a resolution.
Ken Thomas, a Miami consultant who operates the Web site Branchlocation.com, said both Wells and Citi need Wachovia's entire network.
"For Citi, this is really the only chance it has to get to a national level," he said in an interview Monday. For Wells, this would be a chance to become a trillion-asset banking company and to claim "too big to fail" status in the eyes of regulators.
Charles B. Wendel, the president of Financial Institutions Consulting Inc., agreed with that assessment. Citi needs to ramp up its deposit base, he said, and gaining only Wachovia's Northeast operations might not do enough to help it on this front.
From Wells' perspective, acquiring Wachovia in full would give it a major East Coast operation for the first time, but a partial buy, focused largely on the West Coast, would appear to give it primarily the big chore of sorting and selling off overlapping branches, Mr. Wendel said in an interview Monday. "Wells Fargo is very careful about these things. If the economics aren't right, they still might just pack up and walk away."
Robert Patten, an analyst at Regions Financial Corp.'s Morgan Keegan & Co. Inc., said the situation gets more confusing when considering all the businesses and divisions embedded within Wachovia's retail bank, such as mortgages, auto lending, and wholesale lending.
"What do you do, for example, with the private-client customers?" he asked. "That situation is a very difficult thing to dig into."
Analysts said how to fairly divide Wachovia's loan exposure, including $122 billion of option adjustable-rate mortgages, would be an issue.
Wells and Citi had both factored in substantial losses into their bids, though Wells' gave a generally more benign nod. "How many bad assets should Citi inherit if it only picks up branches in the Northeast?" Ms. Bush asked.
Kevin Fitzsimmons, an analyst at Sandler O'Neill & Partners LP, said in an interview that carving up Wachovia's retail bank and loan portfolio might be "better for Citi in terms of risk, but they might have to go out and get some other banks" to gain national scale.
