Wachovia rumoured to be in talks

Wachovia is rumoured to be in talks with rivals to be taken over following a slump in its shares.

Citigroup and Wells Fargo & Co have been named as potential suitors by the New York Times, while the Wall Street Journal has suggested Spain's Banco Santander may make a bid.

Following Washington Mutual's downfall and its quick sale to JP Morgan Chase, investors are looking to the next bank to fail.

With a large and risky mortgage portfolio acquired from Golden West Financial Corp in 2006, Wachovia is seen as insecure and shares in the bank fell 27 per cent on Friday.

The government is also said to be involved in the talks, which are being held as a $700 billion bailout plan has been agreed.

Wachovia may benefit from the plan, which will allow banks to sell their mortgage-backed debts to the government.

However, it must first be passed by the House of Representatives and the Senate.