Citigroup and Morgan Stanley are working feverishly to complete a deal for a creating a joint venture out of Citi's Smith Barney brokerage unit and sources close to the deal say that barring a last minute hiccup there should be an announcement after today's closing bell.
The deal would provide a capital boost for Citigroup , the giant bank that owns Smith Barney. But it will also be the first step toward the break up of the massive investment bank, which is under pressure to raise capital to stem losses.
Citigroup is expected to announce another massive loss for its fourth quarter. Morgan Stanley has been ailing as well, albeit not as bad as Citigroup. This deal gives Morgan's new business model of providing advice to large companies and small investors a boost.
The firm will control 51% of the joint venture with the right to increase its share in future years. In effect Morgan Stanley would control the largest brokerage firm, with 18,000 financial advisers compared to the 16,000 at the Merrill Lynch subsidiary of Bank of America .