New York - Wells Fargo won the takover battle for the ailing US banking giant Wachovia on Friday, with rival bidder Citigroup giving up its claim.

However, Citigroup said it would pursue its legal claim for 60 billion dollars in punitive and compensatory damages which it had launched against Wachovia after it made a deal with Wells Fargo despite an earlier sale agreement with Citigroup.

The acquisition is set to move Wells Fargo to the top of the US private banking business sector.

Last week, Citigroup had announced a 2.2-billion-dollar deal to take over large parts of Wachovia, but was then stumped as Wells Fargo and Wachovia announced they had agreed on a higher offer of 15 billion dollars in a stock-for-stock exchange.

Citigroup accuses Wachovia, the US fourth-largest bank, of breach of contract.

Wells Fargo and Wachovia would face a serious problem if Citigroup succeeds with its lawsuit as the payment would be a new burden on the newly-merged group, insiders said Friday.

A possible out-of-court settlement was therefore also possible, according to analysts.

Citigroup also stressed it was still prepared to carry through its deal with Wachovia under the conditions agreed originally.

Earlier this week, the two rivals in the scramble for the ailing banking giant had stalled their legal battle for further talks about a possible division of Wachovia.

However, the talks also brought to light even higher risks than expected in the possible takeover of the bank, the Wall Street Journal reported Thursday.

Citigroup and Wells Fargo had been surprised "by the concentration of assets they regard as low quality," according to the newspaper.

Wachovia appears to have been at the verge of collapse when the deal with Citigroup was made last week. Citigroup had therefore shied away from a complete takeover of the bank.

The US Federal Reserve had been pressing for a swift solution in the takeover battle, fearing massive problems for Wachovia which is already suffering from the fallout of the global financial crisis. (dpa)