Meanwhile, Citi and Wells Fargo have terminated discussions about a possible sale of Wachovia’s assets. However, in a separate statement, Citi said that although it has agreed to end negotiations, it has not dropped its lawsuit against Wells Fargo and Wachovia. It is a demanding a total of $60 billion in damages after Citi’s agreement to buy Wachovia over a week ago was overturned.

"Without our willingness to engage in this transaction, hundreds of billions of dollars of value would have been seriously threatened. We stood by while others walked away. Now, our shareholders have been unjustly and illegally deprived of the opportunity the transaction created," Citi said.

Citi chief executive Vikram Pandit said: "We did not seek the Wachovia transaction; Wachovia brought it to us. Our focus remains on capitalising on our global strengths. We will continue to apply the same discipline we employed in this and other recent transactions to future acquisition opportunities.”

The takeover row prompted the US Federal Reserve, which has been worried about the impact of the saga on its bid to calm financial markets, to broker a deal.

Wells Fargo and Wachovia said the deal will require no financial assistance from the Federal Deposit Insurance Corporation or any other government agency. The now-defunct Citi deal had involved such assistance.

“As previously announced, under the definitive agreement between the two companies, Wells Fargo will acquire all outstanding shares of common stock of Wachovia in a stock-for-stock transaction. In the transaction, Wells Fargo will acquire all of Wachovia Corporation and all its businesses and obligations, including its preferred equity and indebtedness, and all its banking deposits,” the statement from Wells Fargo and Wachovia said.

As a result of the takeover, the combined US banking company will have $1.42 trillion in assets, $787 billion in deposits, 48 million customers, $258 billion assets under management in mutual funds and 280,000 staff.