Troubled lender Wachovia Corp. appeared determined Sunday to plow ahead with a planned union with Wells Fargo & Co., despite an order from a New York State Supreme Court in favor of jilted suitor Citigroup.

Citigroup was blindsided last week in its bid to complete a tie-up after Wachovia, which originally agreed to a merger with the banking giant, took what it deemed to be a better offer from Wells Fargo.

But in a statement Sunday, the Charlotte, North Carolina-based Wachovia said it does not believe a court order has "any effect on the validity" of a subsequent merger agreement with Wells Fargo.

Wachovia said Sunday that it "continues to believe its agreement with Wells Fargo, which involves no government assistance, is proper and valid."

The company added that in its view, "the agreement is in the best interests of shareholders, employees, creditors and retirees as well as the American taxpayers."

After agreeing in principle to a US government-backed deal forged Sunday with Citi, Wachovia reversed course and announced Friday its preference for Wells Fargo.

Citi said a court had granted an injunction late Saturday extending its exclusive rights to negotiate a merger with Wachovia after Wells Fargo muscled in on the talks last week and announced a takeover of its own.

"Citi tonight was granted emergency injunctive relief extending the exclusivity agreement between Citi and Wachovia Corp. until further order of the court," Citi said in a statement late Saturday.

"Citi has made clear it is prepared to resume negotiating in good faith to complete the transaction."

Citigroup's share plummeted after the news, closing 18 percent lower at 18.35 dollars on Friday. Some analysts suggested the loss of the deal would leave question marks over the solidity of Citigroup's finances.

San Francisco-based Wells Fargo said Sunday that the legal challenge by Citi would not derail its bid.

"We are confident that we will complete our announced merger with Wachovia. Nothing in the court's temporary order impacts our ability to ultimately do that," the bank said in a statement.

Wachovia had been in danger of failure after its shares lost more than 70 percent of their value in a year, as investors feared a panic run on the beleaguered institution.

Many thought the once fourth-biggest US bank by assets would share the fate of its rival Washington Mutual, which was seized by the government and sold to investment bank JPMorgan Chase in one of the biggest-ever US bank failures.

With help from the Federal Deposit Insurance Corporation (FDIC), Citi was to buy the banking operations of Wachovia and the US government would take a stake in Citigroup in exchange for guaranteeing Wachovia's distressed assets.

"At the time the Wachovia/Wells Fargo transaction was announced, Citi was finalizing the agreements required to consummate its FDIC-assisted open bank transaction with Wachovia," Citi said.

"Citi has been providing liquidity support to Wachovia since the day of the announcement."

The injunction from the New York state court extends Citi's exclusivity agreement until further order and the two banks must appear before the court on October 10.

The battle for Wachovia is part of the great redrawing of the US financial landscape as commercial and investment banks go bust or seek takeovers because of losses linked to the subprime housing market.

The planned acquisition by Wells Fargo, which traces its roots to the Wild West and the Gold Rush of the 19th century, would give it the biggest network of branches in the United States.

If the deal were to go through, Wells Fargo would have 10,761 branches, 4,618 more than Bank of America Corp., which currently has the most branches.

It has offered 15.1 billion dollars in an all-stock deal to buy all of Wachovia and it stressed that its proposal did not have any government involvement or taxpayer risk.

Citigroup offered to pay 2.16 billion dollars in stock for Wachovia's banking activities and some of its debts.

Citigroup would assume up to 42 billion dollars of losses from a pool of 312 billion dollars of loans held by Wachovia; the FDIC would absorb losses beyond that.

The takeover was orchestrated with the Federal Reserve and Treasury Secretary Henry Paulson in consultation with US President George W. Bush.