Citigroup Sells Stake In Smith Barney To Morgan Stanley
In a move that signaled Citigroup’s need for quick cash, the New York-based banking giant announced Tuesday evening that it would sell its prized Smith Barney brokerage unit to Morgan Stanley for $2.7 billion.
The deal gives Morgan Stanley a 51% stake in Smith Barney, which will take the name, Morgan Stanley Smith Barney, moving forward. The combined entity now becomes one of the nation’s largest brokerages, with more than 20,000 financial advisors and $1.7 trillion in client assets.
The past year has proved brutal for Citigroup, following $20 billion in credit losses and write-downs triggered by the ongoing financial crisis. The bank’s financial troubles became so dire, CEO Vikram Pandit was forced to accept an emergency infusion of $45 billion from the Treasury Department’s Troubled Asset Relief Program (TARP). A second bailout was needed in November, with the government handing over another $20 billion plus a guarantee to absorb a portion of future losses tied to $306 billion of Citigroup’s riskiest assets.
Citigroup’s sale of Smith Barney doesn’t mean smooth sailing is ahead. The company’s stock, which experienced nearly an 80% drop in 2008, is down 12% in 2009. Making matters worse: Citigroup is expected to post its fifth consecutive quarterly loss when it reports financial results for the fourth quarter on Jan. 22. Analysts predict the loss could be more than $17 billion.
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