Citi, JPMorgan, Capital One bid for Chevy Chase-sources

By Paritosh Bansal and Dan Wilchins

NEW YORK (Reuters) - Citigroup Inc (C.N), JPMorgan Chase & Co (JPM.N) and Capital One Financial Corp (COF.N) are among the final bidders for Chevy Chase Bank, a Bethesda, Maryland, lender, sources familiar with the matter said.

Other banks that looked at Chevy Chase earlier in the process included SunTrust Banks Inc (STI.N) and BB&T Corp (BBT.N), one source said.

Chevy Chase has $11.4 billion of deposits and 292 branches, according to the Federal Deposit Insurance Corp website.

"The key thing with that bank is that the asset side is not very attractive, but the deposit side is incredibly valuable because it is in Washington, D.C.," the source said.

A deal would make the most difference to Capital One, which is based in McLean, Virginia, and had $98.9 billion in deposits as of Sept 30. It has 739 branches primarily in New York, New Jersey, Texas and Louisiana.

Chevy Chase could help it expand its reach in the affluent Washington, D.C., area, while reducing reliance on credit cards, where growth is slowing and credit losses are mounting.

For JPMorgan and Citi, Chevy Chase would be a drop in the bucket. JPMorgan has $969.8 billion in worldwide deposits. Citi had $780.3 billion as of Sept. 30, about a quarter of which are in the United States. Both companies have more than $2 trillion of assets on their balance sheets.

For Citi, the bid comes at a tough time. Its shares lost about one-third of their value in the first three days of this week as investors worried that Chief Executive Vikram Pandit's plan to cut expenses by 20 percent and eliminate 52,000 jobs won't restore the bank to health.

Citi's largest individual investor said on Thursday he would boost his stake modestly, but failed to revive investor confidence as the bank's shares tumbled more than 20 percent.

Chevy Chase was founded in 1969 by Chairman and Chief Executive B. Francis Saul II. It opened its first branch in a trailer on Connecticut Avenue in Chevy Chase, Maryland.

U.S. banks are broadly looking to expand their branch networks and amass pools of low-cost retail deposits after seeing how unreliable capital markets can be when times are tough.

JPMorgan Chase has already put this strategy into play by buying banking assets of Washington Mutual Inc (WAMUQ.PK) from the FDIC for $1.9 billion. Wells Fargo & Co (WFC.N) trumped a Citigroup bid to take over East Coast banking giant Wachovia Corp WB.N.

Even securities giants Goldman Sachs group Inc (GS.N) and Morgan Stanley (MS.N) have become banks and joined the hunt for deposits.

Citi, JPMorgan and SunTrust declined to comment. BB&T, Capital One and Chevy Chase were not immediately available.

(Editing by Lisa Von Ahn and Gunna Dickson)

(For more M&A news and our DealZone blog, go to www.reuters.com/deals)