Citigroup and Wells Fargo have opened talks to resolve their bitter dispute over the takeover of a Wachovia in a move that could lead to a break-up of the sixth-largest lender in the US.

People close to the situation said the New York Federal Reserve was actively involved in the discussions between Citi, which bid $2.2bn for Wachovia’s banking operations last Tuesday, and Wells Fargo, which trumped that offer with a surprise $15.1bn takeover bid for the whole company on Thursday.