Wells Fargo emerged the victor in the battle for Wachovia after Citi was left at the altar. The union of Wells Fargo and Wachovia will create the country’s third-largest coast-to-coast banking behemoth. But the deal still faces obstacles before it can be finalized.

“I think it’s fantastic—it is the first bit of sunshine I’ve had over the past couple of months,” says one Wachovia advisor. “Ever since the firm bought Golden West Financial, (a California lender that Wachovia bought for $24.2 billion in October 2006) it’s been the big albatross around the firm’s neck.”

The deal is good news for employees of both firms—Wells Fargo’s geographic footprint has less overlap with Wachovia’s than Citi does, and under the Wells deal, Wachovia won’t be split up. Wachovia shareholders—including Wachovia advisors—certainly appreciate the much richer offer Wells made. The original $15.1-billion offer had shrunk to $11.4 billion by Friday due to declines in Wells Fargo’s share price. But that is still quite a bit higher than the $2.16 billion Citi offered, with FDIC backing, for certain Wachovia operations.

Meanwhile, Wells Fargo gets Wachovia’s bank branch network and deposits, extending its reach into the Northeast. It also gets a giant and profitable retail brokerage force with almost 15,000 advisors. Wells Fargo already owns H.D. Vest, a small tax-planning-based b/d with around 5,000 financial advisors.

The challenge now for Wells Fargo will be raising the $20 billion it needs to shore up its capital position to cover Wachovia’s liabilities. Wells had planned to raise that cash by issuing new common stock. After the close Thursday, Morningstar analyst Jamie Peters noted the capital markets could prove a challenge for Wells: “Bank of America struggled earlier this week to raise $10 billion of capital—and ended up selling at a steep discount to its preannouncement price.”

For the most part, Wachovia reps are relieved Wells stuck to their bid and Citi backed down. One Wachovia rep says his team watched as other banks rescued b/ds—like BofA and Merrill—and “to see Wachovia go the other way was a little unsettling.” Citi had offered to buy only Wachovia’s bank branches, deposits and its private bank, which would have left Wachovia Securities and Wachovia’s asset management operations to run independently. Another plus of the Wells Fargo/Wachovia merger is the similarity between the cultures of the two firms, says one rep. He speculates that Merrill reps will feel less at home, for example, in the culture of a giant consumer bank like Bank of America.

The combined company will take the Wells Fargo name and will be based in San Francisco. Together they will have 280,000 employees, $1.42 trillion in assets and $787 billion in deposits. Citi plans to seek damages from Wells and Wachovia for breach of contract and interference with the contract. In the meantime, the Fed said it "will immediately begin consideration,” of Wells Fargo's application for the acquisition. Looks like it may have to find another way to get those bank deposits.

For more: Read these earlier stories about the battle over Wachovia, one proposal to split Wachovia between Citi and Wells Fargo, shareholder opposition to the original Citi deal and Citi’s initial offer for Wachovia.