Reports say struggling US banking giants Citigroup and Morgan Stanley are close to a deal for a joint venture to create the world's biggest brokerage.
The Wall Street Journal reported that the deal would merge Citi's Smith Barney division with the brokerage operations of Morgan Stanley.
Quoting 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 is a Wall Street investment bank which converted to a bank holding company in September to have easier access to credit to survive the global financial crisis. It has received $10 billion from the US Treasury's $700 billion Troubled Asset Relief Program (TARP).
Citigroup, also badly hurt in the credit meltdown, received a $25 billion taxpayer bailout under the TARP programme initially aimed at supporting the financial system. The Treasury later agreed to invest $20 billion in Citigroup, giving US taxpayers an 8% stake in the company.
According to the Journal, the terms of the current talks call for Morgan Stanley to control 51% of the two companies' brokerage units, with Morgan Stanley paying Citigroup about $2.5 billion.
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, now owned by Bank of America, from its perch as the world's leading brokerage.
