Wachovia Corp. shares plunged yesterday on speculation that record losses tied to bad home loans may force it into a merger with Citigroup Inc., Wells Fargo & Co. or Banco Santander SA.

Wachovia, the dominant bank in the Philadelphia region, dropped $3.70, or 27 percent, to close at $10, then fell further in after-hours trading, on a New York Times report that New York-based Citigroup was in early talks to buy the Charlotte, North Carolina-based bank. The Wall Street Journal said bids may come from San Francisco-based Wells Fargo and Spain's Santander.

Takeovers can wipe out bank shareholders if they occur after regulators seize the company. That's what happened to Seattle-based Washington Mutual Inc., the nation's biggest thrift and now the largest bank failure in history. JPMorgan Chase & Co. paid $1.9 billion for deposits and branches of WaMu, leaving the company with about $28 billion in debt, according to Bloomberg data, and little means to pay it off.

"Washington Mutual showed that one of the big ones can go down, and if you are looking at who else in the top 10 is facing the most pressure, Wachovia is right there," said Stan Smith, a banking professor at the University of Central Florida in Orlando.

WaMu was taken over by regulators Thursday night after customers of the Seattle-based lender withdrew $16.7 billion from accounts since Sept. 15.

The Times said there's no guarantee negotiations between Citigroup and Wachovia will result in a deal. The Journal, citing a person familiar with the talks, said officials are also courting Wells Fargo and Santander even though they don't believe their bank is short on cash and don't see any need to rush into a deal. Earlier talks with Morgan Stanley broke off.

Citigroup spokeswoman Christina Pretto declined to comment on the Times report. Santander's Peter Greiff declined to comment on the Journal's report, as did Wells Fargo's Julia Tunis Bernard.

Fears of mounting losses on Wachovia's $122 billion in option adjustable-rate mortgages helped push the Charlotte, N.C.-based company's shares down 64 percent this year before yesterday's trading.