Wachovia may have to sell remaining units too

By Paritosh Bansal and Robert Margolis

NEW YORK (Reuters) - Wachovia Corp WB.N may have to sell its large brokerage and other businesses that are still standing after a U.S. government-brokered sale of its banking operations to rival Citigroup Inc (C.N).

As part of the deal on Monday, Wachovia plans to remain a public company and retain asset management unit Evergreen Investments, brokerage Wachovia Securities, and insurance brokerage Wachovia Insurance Services.

But the company that will emerge from what was once the sixth-largest U.S. bank by assets may find it tough going on its own, experts said.

"Is it a viable standalone company? Yes. Is it likely to stay an independent company indefinitely? No," said Robert Ellis, an analyst at financial research firm Celent. "If everyone else is moving to the universal bank model, it is not going to have the wherewithal to compete."

A Wachovia spokeswoman said the company "will be a focused leader in retail brokerage and asset management."

Ellis said potential buyers could include foreign banks such as HSBC Holdings PLC (HSBA.L) and Banco Santander SA (SANB4.SA), which may want to build their U.S. presence.

CreditSights said in a report JPMorgan Chase & Co (JPM.N), which is interested in expanding its retail brokerage presence, may want to look as well, although after its acquisition of Washington Mutual Inc last week it was unlikely to do any more deals before next year.

Private equity has been active in the asset management space, including Monday's deal for Lehman Brothers Holdings Inc's (LEHMQ.PK) Neuberger Berman unit, and could look at some businesses as well.

UBS analysts estimated that Wachovia Securities and asset management business could be worth between $10 billion and $21 billion, depending on assumptions about the price-to-earnings multiples used.

But Wachovia's shares dropped more than 81 percent to $1.84 on Monday. Its market value fell to about $4 billion, even less than the roughly $6.6 billion the bank paid for A.G. Edwards last year.

In a research note titled, "Wow, where to begin?" Stifel Nicolaus analysts said there was not enough information, such as details about corporate expenses and debt, to determine how profitable the remaining company would be.

"This is hard to determine because we just don't have all the pieces of the puzzle yet," they wrote.

WATCHING CLOSELY

Investment bankers have been watching the Wachovia situation unfold with interest.

"We have looked at Evergreen pretty closely. We are certainly keeping it in mind for any of our clients," said a financial service banker who did not want to identified because he was not authorized to speak to the media.