U.S.-based Citigroup (NYSE:C) announced it will purchase the banking operations of Wachovia Corp. (NYSE:WB) for around $2.2 billion, or $1 per share, in the latest round of Wall Street's financial consolidation.

The U.S. Federal Deposit Insurance Corp. (FDIC) stressed Monday morning, however, that Charlotte, N.C.-based Wachovia wasn't rescued from failure – rather, it was acquired on "an open-bank basis" with assistance from the FDIC.

"Wachovia did not fail," the FDIC said, adding the agency would absorb the bank's losses of over $42 billion and would receive $12 billion in preferred stock and warrants from Citigroup. Citigroup will assume responsibility of the bank's losses of $42 billion and under.

Under the deal's terms, Citigroup takes control of the lion's share of Wachovia's balance sheet, including $400 billion in deposits, and will assume the latter's senior and subordinated debt.

Wachovia – which took a nasty hit from its 2006 purchase of California's Golden West Financial – will retain its brokerage firm, AG Edwards and money management wing Evergreen.

The move further consolidates the U.S. financial sector, and gives Citigroup one of the biggest retail banking presences in the United States.

Citigroup's closing price on the New York Stock Exchange was $17.75, down by $2.40, but in after-hours trading the bank's stock gained 30 cents to $18.05.