Bank of America and Citigroup agree to buy $3 billion stake in the struggling bank

Reuters/Garrett Ellwood Bank of American and Citicorp have agreed to acquire a majority stake in a struggling U.S. mortgage lender, with the combined firm being valued at more than $3.4 billion, according to a filing with the Securities and Exchange Commission.

Citigroup will be renamed Citigroup Inc., and Bank of Americans will be known as BankAmericard.

The deal is expected to close in the fourth quarter.

Citi and BankAmericards largest customer, the mortgage lender Regions Financial Corp, will each retain about 20% of the new company, according the filing.

The other 30% will be controlled by Bank of Americas and Citibank.

The terms of the deal were not disclosed.

Bank of America will also buy another company, Wells Fargo & Bank of Commerce, for $3,350 million.

Wells Fargo and BankOfCommerce will operate as separate companies, with Wells Fargo managing about 2% of its business, while BankAmericas financial services unit will handle the remaining 20%.

Wells Fargo is in the process of selling its consumer banking business to Citi, while BanksAmericard will remain a separate entity.

The acquisition is expected as the U.K. government is seeking to slash mortgage insurance costs by closing some financial institutions.

The U.N. agency, which is trying to find a new way to save billions of dollars in insurance costs, recently approved a plan to cut costs to the insurers by more than a quarter by 2020.

Citations and News stories by Reuters Staff