Citi, Morgan near deal on brokerage

WASHINGTON – Ailing US banking giants Citigroup and Morgan Stanley are near a deal for a joint venture to create the world’s biggest brokerage, The Wall Street Journal reported yesterday.

Such a deal would merge Citi’s Smith Barney unit with the brokerage operations of Morgan Stanley.
Citing people familiar with the matter, the Journal said that cash-starved Citigroup and Morgan Stanley, which wants to reduce its exposure to volatile trading businesses, ‘seem ready to roll the dice.’
Morgan Stanley, a Wall Street investment bank icon that converted to a bank holding company in September to have easier access to credit to survive the global financial crisis, has received US$10 billion from the US Treasury’s 700-billion-dollar Troubled Asset Relief Programme (TARP).
Citigroup, also badly hurt in the credit meltdown, received a US$25billion taxpayer bailout under the TARP programme initially aimed at supporting the financial system.
The Treasury later agreed to invest US$20 billion in Citigropup. According to the Journal, the terms of the current talks call for Morgan Stanley to control 51 per cent of the two companies’ brokerage units, with Morgan Stanley paying Citigroup about US$2,5 billion.
That essentially represents a premium, the newspaper said, since Morgan Stanley’s brokerage operation has about 8 400 brokers compared with more than 11 000 working at Smith Barney.
The deal would topple the former Merrill Lynch & Co., now owned by Bank of America Corp., from its years-long perch as the world’s leading brokerage, it noted.
-Nampa-AFP