Wells Fargo last night looked set to acquire Wachovia in a $11.7bn (£6.8bn) all-share deal after Citigroup pulled out of the bitter battle for the US's sixth-largest bank because it did not want to buy the lender's bad assets portfolio without government help.

The acquisition of Wachovia will transform Wells, which has to raise $20bn to fund the deal, from a West Coast-focused lender into a national retail banking powerhouse with $1,420bn in assets and 12,200 branches.