Citigroup has agreed to buy San Francisco based Golden State Bancorp for $5.8bn (£3.97bn) in a cash and share deal, subject to shareholder and regulatory approval.

"The acquisition of Golden State marks an important step in our efforts to increase Citigroup's retail distribution franchise in the US," chairman and chief executive Sanford I. Weill said.

"The real bang here is that Citi combined with Golden State will have the fourth largest deposit base in California," said RBC Capital Markets analyst Mark Agah.

"It has a very cost-efficient branch system too."

Golden State owns the eighth largest mortgage servicing company, First Nationwide Mortgage, and the car loans operator Auto One.

Golden State's assets are worth about $54bn while it has $25bn in deposits in California and Nevada.

Citigroup has assets of more than $950bn.

Citigroup shares closed down 59 cents at $45.26 while Golden State rose 66 cents to $36.50.