(Source: The Charlotte Observer (Charlotte, N.C.))CHARLOTTE, N.C. _ The victory party is under way for Wells Fargo & Co., the winner in the fight to buy Wachovia Corp. But analysts cautioned Friday that the San Francisco-based Wells still faces plenty of challenges as it proceeds with its purchase of the Charlotte bank, including an uncertain market and losses in Wachovia's portfolio that could prove bigger than expected.

"Now comes the hard part," R. Scott Siefers, an analyst at Sandler O'Neill + Partners, wrote Friday, the day after Citigroup Inc. said it would stop pursuing its bid to buy at least a piece of Wachovia.

For one thing, Wells Fargo wants to raise $20 billion from investors to help pay for the Wachovia purchase, valued at $5.64 per share based on Friday's closing price. Although Wells is one of the banking industry's relative stalwarts, it still could run into trouble reaching that goal. Charlotte's Bank of America Corp., also seen as a comparatively strong bank, had to price its $10 billion capital raise at a substantial discount this week. That meant it had to issue more shares than anticipated, which dilutes the value of current shareholders even further.

"Although we are not suggesting that Wells Fargo will have trouble getting such a large offering done even in this difficult market, we are not sure why investors would be overly excited or tempted to buy shares ahead of this potential offering," wrote Christopher Mutascio, an analyst at Stifel Nicolaus.

Analysts also expressed concerns that Wachovia's losses would prove bigger than Wells has accounted for, even given Wells' generous estimations. For instance, Wells says it expects losses of about 26 percent on Wachovia's $122 billion portfolio of Pick-A-Payment mortgages. Wachovia had planned for 12 percent.

"Wells Fargo assumes it's getting a bargain," said Ira Rheingold, executive director of the National Association of Consumer Advocates. "But there's no telling what they're really buying."

New York-based Citi said Thursday evening that it had "dramatic differences" with Wells Fargo over how to value the risks associated with buying Wachovia, raising speculation that Citi saw more problems in Wachovia than Wells did. Moody's Investors Service said Friday that it's considering cutting its rating of Wells, in light of the increased risk with the Wachovia purchase.

In a statement Thursday night, Wells chairman Dick Kovacevich gave a nod toward worries about Wachovia's balance sheets, and sought to diminish them by noting that credit teams from the two banks have been working together and that Wells will record Wachovia's credit-impaired assets at fair value.