Citigroup confirms brokerage merger talks with Morgan
NEW YORK -- In a brief statement Tuesday, Citigroup said it is holding discussions about combining its Smith Barney brokerage with Morgan Stanley's wealth management business but that no agreement has been reached. News of the talks first surfaced Friday.
A person close to the negotiations has said that Citigroup plans to sell a 51% stake in Smith Barney, its retail brokerage, to Morgan Stanley for about $2 billion to $3 billion in cash. The person spoke on condition of anonymity because he was not authorized to discuss the ongoing talks.
Shares of Citigroup fell on worries that credit losses will increase substantially.
Analysts are hurriedly boosting their forecasts for expected losses at Citigroup after reports surfaced on Sunday that the third-largest U.S. bank could post a fourth-quarter operating loss in excess of $10 billion. The bank is scheduled to report results on Jan. 22.
Results "are likely to continue to be pressured by very sharp increase in credit costs, predominantly in the U.S., further large write-downs, high cost of additional preferred capital, (the) high cost of expensing insurance provided by the government, and very weak performance in its investment banking related businesses," JPMorgan analyst Vivek Juneja wrote Tuesday.
The analyst now expects a fourth-quarter loss of $1.09 a share, reflecting a gain of 74 cents a share from the sale of its German retail banking business, and a 2009 loss of 30 cents a share. He previously expected profits of 45 cents for the quarter and $2.10 for the year.
